LO SAN JOHN: That recent drop is roughly 15%. Not small. What's the rationale, Audrey?
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LO SAN JOHN: As one commentator I read noted, given the strong fundamentals we are in, if external factors, like the Russia-Ukraine war, did tip the US into a recession, it would be like jumping out of a basement window. Audrey, commodities continue to be an interesting story. We have covered commodities in previous episodes where we highlighted the structural bull story in favor of commodities. Yet right now it feels like a knife in the back. So how should we be thinking about this?
AUDREY CHEONG: Well, commodities broadly-- that's energy but also industrial metals and food-- have done well. Now, this is because, by definition, they are spot assets, meaning as long as demand exceeds supply, this is immediately bullish or positive. Financial assets, however, are more about anticipating the future, and hence their growth outlook is always the focus. Although commodities in general are higher today and over the last year, they have recently weakened substantially in the last month.
Discover why natural resources may be worth investing in.
Video transcript
[MUSIC PLAYING]
LO SAN JOHN: Welcome to Citi Market Watch where we concisely unpack all you need to on important topics. Joining me, Audrey Cheong, Citigold Private Client Portfolio Counselor.
AUDREY CHEONG: Hey, San. Can you believe it? We are halfway through the year.
AUDREY CHEONG: The BMC, or Bear Market Checklist, is showing 8 and 1/2 out of 18 sell signs for the US market and 6 out of 18 signs for the global market. And the concern levels flash red if and when we surpass 50%. So it's getting close to the edge for the US, but not for the global markets.
AUDREY CHEONG: This is very much symptomatic of the current market fears around the risk of a recession. But as we discussed before, the BMC is still signaling buy the dip. Now, the same checklist in 2008 flagged 13 out of 18 red flags for the US market and 17 and 1/2 out of 18 red flags for the global markets during the 2000 bear market and recession.
LO SAN JOHN: Exactly. Time flies. Audrey, how's the electricity rationing going?
Well, the Russia-Ukraine war continues, and this continues to impact natural resources, energy, metals, and food. Inflation continues to be felt globally. We are feeling it in our utility bills, and certainly those who drive are also feeling it when they refill their petrol. Audrey, markets have been especially volatile too. We talked about our Citi Bear Market Checklist in a previous episode. Anything to be concerned about?
LO SAN JOHN: Thanks, Audrey. Inflation is the singular issue destabilizing markets, and it is frothy. Whilst it remains elevated, the factors that have driven inflation up here are also fading. And with the more entrenched fundamentally based Bear Market Checklist lending support that the US and global economies are still in a better place, we do see opportunities in many asset classes like commodities that have strong structural drivers. Please do listen to our podcast where we will dive deeper into these details. And please speak to your Citigold or Citigold Private Client relationship manager about further opportunities.
AUDREY CHEONG: Not funny, but it's a teachable moment for my kids.
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