We are facing a perfect storm of global food, energy and financial crises set off by the war in Ukraine. Analysts need to stop focusing on monetary policy and the inversion of the yield curve. They need to look out of the window and start dealing with the geopolitical reality of Putinflation.
Chemicals and the Economy
Energy market chaos highlights risks to the global economy, as US consumer sentiment hits all-time lows
Consumer sentiment is already at all-time lows. Rising energy, transport and food prices will likely soon push inflation above 10%, and interest/mortgage rates to 5%+, adding to the risk of a major and long-lasting downturn.
The chemicals industry continues to be the best leading indicator for the global economy
Central banks and investors believed stimulus programs had created a “New Paradigm” where asset prices would always increase. Now they are starting to realise that stimulus is irrelevant against the 3 Horsemen of the Apocalypse – China’s continuing battle with the pandemic, Russia’s invasion of Ukraine, and potential for famine as rising gas/fertilizer prices mean farmers can’t afford to grow their crops or feed their animals.
Ukraine, pandemic, herald major market shifts
Energy and financial markets are exacerbating the risks ahead. Oil prices at current levels – as the chart confirms, they now account for more than 3% of global GDP – have historically led to recession as the chart shows. The reason is that consumers have to cut back on their discretionary spending, which drives economic growth, in order to heat their homes and travel to work and school. Today’s high levels of natural gas prices add to this risk.
Prepare for a K-shaped recession with Winners & Losers
This is why we are facing a K-shaped recession. Companies and investors have a difficult time ahead. They not only have to navigate a potentially major downturn. But they also have to completely reposition their portfolios for the New Normal world that will follow.
IEA issue 10-point plan to cut oil demand – and promote Electric Vehicles and recycled plastics
These are difficult times, and there is no guarantee that they may not get worse. But they also remind us of the critical need to move beyond the Age of Oil, and develop more sustainable energy resources for the future.
Automakers, governments, start to prepare for the launch of Autonomous Vehicles
Automakers are ahead of the game in terms of strategic planning. They soon realised the move to EVs meant their traditional business model, based on proprietary engine technology, would inevitably become obsolete. And so they quickly realised they need to pivot to focus on AVs and become software-driven. The rest of us need to catch up.
Putin’s war in Ukraine set to impact the real economy and financial markets
The issue is simply that investors are in a state of Denial. And so there is a growing risk of a financial crisis as reality finally dawns on them.
Everyone “knows” that the Fed will never let markets fall – and that China will never burst its real estate bubble
Our pH Report Sentiment Index has been a very reliable guide to the S&P 500 in recent years. Now it is suggesting a major downturn may be underway as the US and Chinese stimulus programmes come to an end.
China’s ‘perpetual motion’ housing machine has started to slow
Evergrande’s default will only be the first of many. Companies and countries that have “bet the ranch” on China’s “perpetual motion machine” need to urgently decide how to minimise their potential losses, whilst there is still time.
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