It’s Going to be a Full Week in the Markets

American markets today, viewed several hours before the 9:30 a.m. Eastern time opening appear uniformly negative with all major indices deep in the red. The S&P 500 is struggling a time of writing but has only a very small chance of making it into positive territory during today’s trading session.

Canadian markets appear poised for a nervous start as the TSX 60 and TSX Composite are moving between red and green as I write this column

European markets are open at time of writing and have been deep in the red since market opening there.

Amongst precious metals, gold and silver are up.

Amongst currencies, the Canadian dollar is holding up but the Euro and British pound sterling are down against the American greenback. “The pound continues to sit in the middle of a weakening Euro and strengthening dollar, holding onto the highs against the Euro but falling lower against the dollar as the Ukraine crisis continues to be the focus,” explains Lawrence Kaplin, Chief Economist at London- based payments company Equals Money. The pound fell to new 3-month lows against the dollar in the early hours today as focus now is on a possible siege of Kyiv by Russian forces. Meanwhile the greenback’s safe haven status is increasing. “(The) dollar pushes higher across the board as risk sentiment continues to deteriorate, seeing investors pile into the relative safety of the dollar,” Kaplin says.

That follows last Friday’s session in which Ukraine worries overshadowed a jobs report that otherwise would likely have buoyed the market as the United States added 678,000 jobs in February.

As we begin another week of wondering what Russian President Vladimir Putin will do, about his endgame, the survival of Ukraine and the damage to the economies of the two combatants as well as potential damage to other countries  and whether there are any further sanctions to declare, the market outlook will probably start in a pessimistic mode, especially given the nuclear scare, according to Gavin Graham, Chief Strategy Officer at SmartBe Investments and a 35-year veteran of money management.

Still, it is reasonable to believe that market volatility will continue unabated, and this is an appropriate time to check portfolio positioning and holdings. Graham says that some categories should be considered. Industrial materials are an inflation and growth play. Financials will benefit from higher interest rates. Energy, materials, healthcare and materials all involve what we need every day. We are not going to stop eating, drinking and needing healthcare products. Gold is a separate category and is still below its August 2000 level at $2000 an ounce. It functions as a diversification in a portfolio and is non-correlated to other investments.

In some ways the war increased trends that were already in place. “The sell-off in unprofitable stocks such as Ark Fund’s holdings had been going on for the last year as the previous Covid leaders fell out of favour,” he recalls. In the backdrop the rotation from growth to value is well underway.

The valuations of some high-priced FAANG+ stocks may not be sustainable in an era of tightening interest rates.

Meanwhile, we get clues about three sectors in company reports this week. In the social media category, Bumble Inc. reports fourth quarter results on Tuesday and looks likely to have strong growth in its dating apps. In the consumer staples category, Campbell Soup Co. reports second quarter results on Wednesday, and numbers may come in lower than the previous quarter which had been boosted by consumers stocking up during the pandemic. In the electric vehicles category Rivian Automotive Inc. reports fourth-quarter results on Thursday.

The pending interest rate hike will also be front and center on investors’ minds as will the U. S. Labor Department’s release on Thursday of the Consumer Price Index for February.

The view from this corner: let’s pray for those 1 ½ million refugees caught up in a tragedy --- not of their own making – for those who are not leaving and for those attempting to assist them. And let’s avoid panic equity sales wherever possible as they will crystallize losses.

It’s going to be a full week in the markets.

Related: A Move That the Street Would Gladly Applaud

Al Emid is a financial journalist, broadcaster and author with two books underway.

The Emid Report on Volatility 2022 – the next in the series -- is scheduled for release in Summer 2022 and his book on foreign investing is scheduled for release in January 2023.