The Four Horsemen of the Apocalypse are Pestilence, War, Famine and Death.
https://en.wikipedia.org/wiki/Four_Horsemen_of_the_Apocalyps…
Our Pestilence has been declining as expected (though no epidemiologist is willing to bet that it’s definitely over). I wouldn’t be surprised to see a small spike after the early summer holidays (Memorial Day and the Fourth of July).
https://www.nytimes.com/interactive/2021/us/covid-cases.html…
The war in Ukraine is heating up, moving closer to the Polish border with the possibility of involving NATO.
https://www.nytimes.com/live/2022/03/13/world/ukraine-russia…
The war in Ukraine could cause famine, especially in poor countries. Lack of bread has been at the root of several revolutions (including France) so especially vulnerable importers (e.g. Egypt) could see instability as a result.
https://www.wsj.com/articles/russia-ukraine-war-threatens-wh…
**Russia-Ukraine War Threatens Wheat Supply, Jolts Prices**
**Poor harvests have left global wheat inventories low and fighting has jeopardized Black Sea exports**
**by Ryan Dezember, The Wall Street Journal, 3/13/2022**
**...**
**Wheat stockpiles were already running low and prices were the highest in years thanks to two years of poor growing weather when Russia’s attack jammed up Black Sea trading and endangered nearly a third of the world’s exports. The invasion prompted fears of food shortages in countries fed with imported grain and pushed prices to new highs....**
**The benchmark U.S. price, at $11.07 a bushel, is 72% higher than a year earlier and analysts expect the war will keep wheat high. Rising wheat points to further inflation of food prices and another force blunting the post-pandemic economic recovery. ...Meanwhile, it is unclear if growers in the region will be able to harvest winter wheat, which was planted in autumn, or plant spring crops in the coming weeks....**
**Some of the lost supply will be replaced by exports from Australia, where a record harvest is expected, and India, which has been ramping up shipments abroad amid a string of bumper crops...** [end quote]
Since the ruble has dropped, traders may hold onto wheat as a “hard currency.” That could reduce the supply.
The Federal Reserve didn’t exist during the Biblical age, so the prophets didn’t write about interest rate increases.
https://www.nytimes.com/2022/03/03/business/economy/federal-…
**The Fed chair pledges to bring inflation under control and signals wariness on wages.**
**Jerome H. Powell, the head of the Federal Reserve, told lawmakers the Fed was prepared to prevent a rerun of 1970s inflation.**
**By Jeanna Smialek, The New York Times, March 3, 2022**
**Jerome H. Powell, the Federal Reserve chair, told senators on Thursday that policymakers were prepared to rein in inflation as they tried to fulfill their price stability goal — even if that came at an economic cost...**
**Mr. Powell has signaled that the Fed is poised to raise interest rates by a quarter percentage point at its meeting that ends March 16, and follow up with additional rate increases over the next several months. Fed officials are also planning to come up with a strategy for shrinking their vast holdings of government-backed debt, which will increase longer-term interest rates...**
**Asked if the Fed was prepared to do whatever it took to control inflation — even if that meant temporarily harming the economy, as Paul Volcker did while Fed chair in the early 1980s — Mr. Powell said it was....** [end quote]
Them’s fightin’ words! Powell has never shown the spine to buck the markets before, but he never had to deal with raging inflation before.
https://data.bls.gov/timeseries/CUUR0000SA0L1E?output_view=p…
When Powell said “transitory inflation” he dramatically underestimated the impact and duration. When he says “temporarily harming” he is probably underestimating the impact and duration. The 1980-82 recession saw very high interest rates, the steepest bear stock market in years and long term high unemployment. Despite that, reducing monetary stimulus is the right thing to do.
The Four Horsemen are galloping through the Control Panel as they have done since the beginning of 2022.
The market is in Extreme Fear. The stock market is falling and volatility is spiking. NASDAQ is falling faster than SPX. The percent of S&P100 stocks above their 200-day Moving Average is under 35. The NASDAQ bullish percent index is 27.
The entire Treasury yield curve has shifted upwards. Even though Treasury prices are falling, SPX is falling faster. Treasury yields are rising faster at the short end. The 10-Year Treasury Constant Maturity Minus 2-Year Treasury Constant Maturity has dropped to 0.25%. This flattening of the yield curve may presage an inversion, often a sign of impending recession.
The trade is risk-off. The USD, gold and energy prices are rising while stocks and junk bonds are dropping even faster than the prices of existing Treasury debt. Despite the rise in Treasury yields, the real yields are strongly negative due to high inflation. If the Treasury freed the bond market to charge the historic interest rate of 2% + inflation on the 10YT, the stock market would collapse.
https://home.treasury.gov/resource-center/data-chart-center/…
Despite the recent drop in the SPX, the stock market is still wildly overvalued on a historical basis. Every asset is in a bubble and ripe for popping.
https://www.multpl.com/shiller-pe
The METAR for next week is stormy. I don’t see anything comforting in the news or the charts.
Wendy
https://stockcharts.com/freecharts/candleglance.html?VTI,$SP…
https://stockcharts.com/freecharts/candleglance.html?$IRX,$U…
https://stockcharts.com/freecharts/candleglance.html?$SPX,$U…
https://money.cnn.com/data/fear-and-greed/