August 13, 2022

Commodity Insight: One for the record books

The volatility and capricious market movements this month were breathtaking for the entire Big Four — stocks, bonds, currencies and commodities.

By any measure, May was one for the record books. It was stressful and at times scary for investors and traders alike.

Here are just a few happenings that made headlines.

In the opening days of May, Warren Buffett, one of the most successful investors in history, said he would not pay $25 for all the Bitcoin in the world. The reason? Because, he said, “Bitcoin produces nothing.”

This week, the crypto markets such as Bitcoin, Ethereum, Dogecoin, Luna and all other crypto markets fell on hard times.

Bitcoin that traded as high as $69,000 in November fell to a low of $25,000 within the past few weeks. Ethereum that traded near $5,000 in December traded near $2,000 a few days ago.

Dogecoin that traded around 64 cents when Elon Musk of Tesla was touting the coin as “the peoples coin” hit 9 cents this week. Luna, a cryptocurrency that rose as high as $116, is now trading at zero.

And Binance, the world’s largest crypto exchange, had $1.6 billion worth of Luna tokens when that crypto was at its high. Now, those Luna tokens are worth about $2,400.

An old saying favored by Wall Street when a new year arrives is: “As January goes, so goes the rest of the year.”

That old saw was accurate this year because January was the most bearish in history. And though the year has another seven months to run, 2022 is clearly, thus far, bearish stocks.

For the year, the Dow is down 15% and the Nasdaq is off 29%. Amazon stock is down 40% this year, the largest decline in a decade.

PayPal has lost 44% thus far in 2022. Moderna is off 42% since January.

Etsy is down 40% for the year. Netflix is in the red 40% this year. Meta Platforms is off 38%.

Just to name a few.

The S&P 500 on May 18 suffered its biggest one-day loss since June 2020. Many investors are licking their wounds after the S&P 500 lost 4% and the Nasdaq 100 fell 5.1% in one day.

On May 18 the stock markets, per se, endured the 52nd worst day since 1950, 72 years ago. Walmart stock suffered its biggest two-day decline since 1987, by falling 11%.

Target, a leading indicator for the U.S. economy as a whole, had its worst day since 1987. The loss with Target has most firms on Wall Street calling for a recession.

For the first time in history, gasoline prices at the pump are over $4 a gallon in each state of the union.

However, from businessinsider.com: “‘With expectations of strong driving demand … U.S. retail price could surge another 37% by August to a $6.20 per gallon national average,’ Natasha Kaneva, head of commodities research at JPMorgan, said. … The outlook arrived days ahead of the Memorial Day holiday, the traditional start of the summer driving season that runs until Labor Day in early September.”

From marketwatch.com: “You have to go all the way back to 1981 when stocks, bonds, inflation-protected bonds and industrial metals were all slumping simultaneously. … Then, as now, the Federal Reserve was hiking interest rates to quell inflation. … The transition from stagflation to recession fears leaves investors with no place to hide. In April, bonds saw the worst drop on stagflation concerns, whereas in May, industrial metals and stocks are retreating, which are classic recession casualties.”

From economist.com: “By invading Ukraine, Vladimir Putin will destroy the lives of people far from the battlefield — and on a scale even he may regret. The war is battering a global food system weakened by COVID-19, climate change and an energy shock. Ukraine’s exports of grain and oilseeds have mostly stopped and Russia’s are threatened. Together, the two countries supply 12% of traded calories. Wheat prices, up 53% since the start of the year, jumped a further 6% on May 16th, after India said it would suspend exports because of an alarming heat wave.”

One of the most widely quoted sayings on Wall Street goes like this: “Sell in May and walk away.”

History shows that stocks tend to underperform from May into October. Based on what was seen this month, such sage advice may hold merit.

Only time will tell.

But what we do know is that May was one for the record books.