Did someone forget we are in a bear market?

2 jun 2022

INVESTMENT CONTEXT

• JPMorgan CEO Jamie Dimon stated at a banking conference that investors should brace for a "hurricane right out there down the road and coming our way"
  
• At the same conference, Wells Fargo's CEO Charles Scharf added "the scenario of a soft landing is (...) extremely difficult to achieve in the environment (...) we're in today"
  
• U.S. manufacturing data for May positively surprised, with the index declining to 56.1 vs. analyst expectations of 54.5 - demand apparently remains strong even amidst supply-chain constraints choking retail
  
• Italy's natural gas distribution leader Snam bought a floating regasification terminal with capacity of 5 billion cubic meters a year from Golar LNG as efforts to diversify energy supply off from Russia gain pace
  
• President Joe Biden is expected to be visiting Saudi Arabia later in June to discuss greater OPEC+ commitment to lift crude oil production in a bout to lower prices
  

PROFZERO'S TAKE

• Equities are failing to keep up the rebound attempted last week, on the back of still weak fundamentals and waning technical support - Nasdaq testing the 12k mark in particular testifies that a much-awaited bounce back in tech stocks simply can't hold for now. Tellingly, Jamie Dimon's meteorological metaphors muted from "big storm clouds" just on May 23 to a "hurricane"; ProfZero won't broadcast on The Weather Channel, but definitely concurs the winds of volatility will be blowing strongly for a few quarters more
  
• Encouraging signs from Saudi Arabia are tempering concerns of even higher crude oil prices due to Russia's output being squeezed by sanctions. OPEC+ largest producer indicated it will step in raising output should Russia's quota drop excessively - yet ProfZero argues that can't be expected happen too fast, given the cartel's clear liking for the current price environment. Call on President Biden to ease the increase
  
• ProfZero won't say "I told you" - the big red candle on page 3 does an already excellent job reminding BTC traded in overbought territory for almost 2 sessions. Calling the bottom now? Only on stronger fundamentals
  

PROFONE'S TAKE

• ProfOne set its eyes on lithium, indicated by IEA as the mineral for which demand was growing the fastest. Lithium price ballooned 68% since the beginning of 2022, and car manufacturers do not anticipate any easing for several years, now that the European Parliament just voted to ban the sale of new cars with combustion engine from 2035. Lithium demand is growing so rapidly that ProfOne understands why Tesla (TSLA) CEO Elon Musk wants to integrate upstream into lithium production. Lithium shares a common issue in the commodity space - 80% of the world’s lithium is mined in just 3 countries, namely Australia, Chile and China. Yet another head-scratching factor amidst talks of de-globalization and tighter supply chains
  

PROFTHREE'S TAKE

• This week was rich in Purchasing Manager’s Indices (PMIs) print for May in China. Both the official manufacturing PMI and the Caixin gauge beat expectations, ticking up from April lows. Although the figures remain below the 50-point level which separates growth from contraction, the negative trend seems to have come to an end (or a hold) thanks to lifting in COVID-19 restrictions. ProfThree sees optimism over Shanghai reopening to continue, yet warns against being too naive to exclude the probability of another variant coming. With China’s economy reeling and limited headroom for monetary stimulus due to soaring inflation, it is too early to call a rebound. Profs remain cautious about this year’s economic perspectives for the country - and in a certain way for the (ex?) globalized world at large