As S&P500 keeps sliding down (as it should),
it reflects a profound market rotation:
1) from the overpriced growth into Value
2) from Technology and Discretionary into commodities and materials
3) from the USD into Emerging Markets (mostly Latam).

As the overpriced Tech-heavy S&P500 keeps selling off Canadian
Look at the Toronto Stock Index – healthy performance, being roughly flat YTD (in USD!)
Even more, interestingly, Canadian Equities are doing well as the Bank of Canada has raised rates to rein in inflation!

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As the market keeps melting down,
many investors are looking for a positive catalyst for things to turn around.
Because, objectively looking, the news is depressing:
1) earnings are rapidly decelerating;
2) the Inflation overhang and the inevitable hikes from the Fed would compress multiples
3) geopolitics is gloomy;
4) China’s real estate and the credit there are a major concern
Yet…
I.e. markets never make bottoms on good news.
Markets bottom out when the last seller is gone …
We are not bullish yet, but wait for a heads up!

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It is a bit puzzling how some ppl are getting worried that the Fed would tighten too much?!
1. Has the Fed really done anything yet? No
2. Aren’t we already facing 7-10% inflation?
3. Wasn’t the Fed overly cautious by keeping emergency support for the economy for 2(!) years
4. Didn’t they ignore calls from the market practitioners since 2021 to start normalizing the monetary policy much earlier? 
Oh, God…

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As I read this headline from Ford I smile:
Ford is exploring a way to list its EV business to unlock Tesla-like Value…
I remember back in 1999, Barnes & Noble listed BarnesNoble.com as a separate attempt to “unlock the value” like Amazon!!
Did it work? Hell, no…
That BNBN.com was eventually delisted and its parent company still struggles.
Another thing for Ford NOT to do:
no need to keep cash in Bitcoins to emulate Tesla.

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his is a contrarian view, and we will host a call for clients to go deeper.
We have communicated to clients that the TenViz Cross-Asset analytics sees,
the chances of the Ukraine-Russian escalation being very low and declining.
These low probabilities have been declining (with some noise) since Jan 27, 2022.
Specifically, despite the disturbing news, almost all classes globally signal relative calm: 

• Russian Ruble (RUB) made a bottom on Jan 27th, 2022 and has been stabilizing since then, and is, surprisingly essentially flat YTD
• Russian Equities (MCX) were stabilizing since Jan 24, and are even slightly outperforming S&P500 on the YTD time frame
• 10Y Russian bonds are underperforming all emerging markets sovereigns, but their 2M move of 147 bps is not that alarming when contextualized vs. other regional or global risk-off proxies:
  • 10Y Italy widened by 103bps
  • 10Y Turkey widened by 108 bps
• TenViz proprietary Macro Regimes monitor went into the RiskOn since Feb 9th, 2022.

Commodities with the dominant share Russia-production do not display much stress either (virtually none!):

• Natural Gas TTF (Northern European Hub) peaked on Dec 21 and is down 43% for the last 2 months. That does not signal any price-in stress of possible Russian natgas supplies interruption.
• Palladium – no signs of stress there either!
  • Russia produces about 45% of the global palladium, which is mostly used as a catalytic converter
  • Palladium was steadily appreciating since Sep 2021, i.e. it has bottomed out far before any geopolitical issues emerged in late November. 

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• Crude Oil – we see almost no signs of Russian-driven fears there:
  • Our indicators for Crude Oil all signal the receding Covid, global reopening, inflation, and supply shortages of almost all commodities.
  • we see flows into Crude Oil being entirely driven by the selling of Treasuries (i.e. – the reopening and the inflation trade!) Very much Banks and Life Insurers.

The price of Aluminum is making all-time highs.
See the 10-year chart of aluminum.
There is growing evidence that the global inventories of Aluminum are running low and lower…
Obviously, smelting of aluminum requires a lot of energy which in turn is getting increasingly expensive…

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If you believe, as classical textbooks do, that the commodities futures curves backwardation is a bullish indicator, then Brent Oil has a lot higher to go:
look at this Brent Oil curve that is getting increasingly backward…

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1. Cheaper oil slows down the development of Alternative energy sources
2. Americans would splurge more on gas stations impulse junk: “Twinkies anyone?
3. It increases the US dependency on foreign supplies of crude oil because to remain economical US shale-sourced supplies need a reasonable price of crude oil
4. It encourages unnecessary driving and eliminates the need for carpooling
5. It promotes overconsumption of plastics destroying the habitat
6. It discourages innovation: we would never have Tesla if crude oil stayed at $1/barrell

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Yes, it is possible to make the case that:
the Facebook (Meta-what?) is at the early stages of the structural decline
We all know that they are losing market share to TikTok, Snap, Telegram, etc.
Then why wouldn’t its stock find its bottom at 16x P/E?
Well, cause their margins are so damn high!
Their EBITDA margins run close to 45% and that is unsustainable.
If their margins decline to say 22%, then after taxes and other items, their P/E could be as high as 50x…

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