The Flight to Safety Continues

By John Rothe, CMT

John Rothe CMT is the Founder and Chief Investment Officer of Riverbend Investment Management

March 7, 2022

The flight to safety continues in the market as investors are closely focused on the Ukraine crisis. As a result, the market is primarily being driven by news headlines.

The trend of the S&P 500 is still in decline, below its 200-day moving average, and is struggling to stay above the lows of October 2021 (which has been acting as a level of support).

In addition, the NYSE Advance-Decline line, which measures the number of stocks going up vs going down, continues to decline.

Ideally, we will want to see the Advance-Decline line return to an upward trend as an indication that the market is recovering.

The Ukraine crisis has caused oil prices to dramatically rise. Investors are wondering if oil prices will reach their 2008 peak — which creates yet another problem for the Fed.

Typically high oil prices are both inflationary AND can cause a slowdown in economic growth.

The expectations of future interest rate moves by the Federal Reserve have already been impacted by rising energy costs and the Ukraine crisis.

Previously, the market was expecting the Fed to raise rates by 1/2% during their March meeting. The expectations are now down to a 1/4% rise.

We will be closely watching the March Fed meeting to see if they will take a less aggressive stance on rates, which may help the equity markets begin a recovery process.

Chart of the Week:

It is well known that Russia is one of the world’s largest producers of energy, both natural gas and oil.  So as gas prices continue to hit new highs across the country, just how much of the world’s oil does Russia produce?

Data from the U.S. Energy Information Administration shows that Russia is currently third in the world in daily production of Brent crude oil, with 11% of the total.

The U.S.A. leads with 20% and Saudi Arabia is second at 12%.

Interestingly enough, Russia’s “Urals grade” oil is now trading at an $18 per barrel discount to Brent as buyers are bypassing Russian oil in favor of other exporters.

 

The Week Ahead:

Source: Bloomberg, TD Economics

Riverbend Investment Management Logo 2
John Rothe CMT

Riverbend Investment Management is a Registered Investment Advisor (RIA), established in 2006 with the primary goal to provide actively managed investment strategies to both individual and institutional clients.

© Copyright 2023 | Riverbend Investment Management, LLC is a Registered Investment Adviser. | All Rights Reserved.
The information contained in Riverbend Investment Management’s website are of a general nature and is for informational purposes only and does not constitute financial, investment, tax or legal advice. These materials reflect the opinion of Riverbend Investment Management on the date of production and are subject to change at any time without notice due to various factors, including changing market conditions or tax laws. Where data is presented that is prepared by third parties, such information will be cited, and these sources have been deemed to be reliable. Any links to third party websites are offered only for use at your own discretion. Riverbend Investment Management is separate and unaffiliated from any third parties listed herein and is not responsible for their products, services, policies or the content of their website. All investments are subject to varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy or product referenced directly or indirectly in this website will be profitable, perform equally to any corresponding indicated historical performance level(s), or be suitable for your portfolio. Past performance is not an indicator of future results.