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Well, it finally happened. Wall Street is slowly concluding that inflation is not yet under control and central bank rates will stay higher for longer. OK it accelerated quite a bit this week. That theme cascaded into not just interest sensitive sectors like real estate and utilities but also spilled into commodities. When you factor in the “surprise” ½ point hike by the Bank of England this week, and slowing economic stats from Asia and you have a perfect recipe for hedge fund traders to punish commodities as well. In the case of gold, that pays no stream of income coupled with perceived demand destruction for copper, oil, iron ore etc., it is no wonder the Canadian market suffered more than our friends to the south.

On the other hand, and this goes to Jay Powell’s’ position, US Housing starts surprised to the upside which means US Consumers are by no means finished with their buying habits. Once those houses are completed, they must be filled with durable goods like fridges and stoves plus furniture and fixtures. We feel sorry for Mr. Powell and his team at the Federal Reserve. They keep raising interest rates to curb expenditures and reduce pressure on prices, but consumers continue to spend. Now some of that is being financed with increased debt in the form of loans and credit cards, so we believe a significant number of consumers are leaving themselves vulnerable to a crunch that could last for years.

Speaking of rising prices, Bitcoin has been quietly climbing despite an ongoing avalanche of negative news from exchanges saddled with lawsuits and investigations. It certainly seems to be beating the performance of gold and suggests a growing mistrust of fiat currencies from countries saddled with ever growing mountains of debt. Got to love the naysayers but it’s too rich for our blood. Give us a Canadian oil company with growing production any time.

Turning back to international markets, we watched with amusement the ability of the US Administration as it sought to smooth US-Sino relations with one side of their mouth and then dash and bash it with the other side of their mouth. We also note the efforts by the Biden Administration to woo India as a future source of manufacturing and production. We have long maintained that India will rise as a significant global player just so long as they can clean up their corruption and counterfeiting activities. Revenue Canada phone scams anyone?

However, the country has the largest population on the planet with a much younger population, they are poised for significant growth. We just question the optics of some of their activities. No sooner did Western nations unite to ban Russian oil imports, that India suddenly becomes the second largest buyer of said oil.

Still, it should come as no surprise that global technology players are looking to India as a destination for new factories. Already this week, Micron Technology, Applied Materials and Lam Research have announced investments and partnerships in India. It should be a wake-up call to our country. Their universities are pumping out engineers and scientists as fast as possible, and the students that don’t make the grade locally are coming to North America for their education and we are pretty sure they are not enrolling in Arts or Social Humanities. Just saying.

Happy trading and stay safe.

Steve Bokor and the Ocean Wealth Team

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