US stocks posted another week of gains as investors watch developments in Russia’s war in Ukraine and as Fed rate hike expectations continue to grow. It seems the skyrocketing move higher with commodity prices has taken a break and that has allowed investors a chance to pile back into equities. Geopolitical risks remain very elevated and the rally in equities over the past two weeks is impressive. The US economy is still in good shape, but buying every stock market dip probably won’t be the attitude for most traders going forward given how hawkish the Fed has turned.
Many were surprised with today’s soft pending homes sales report. Pending home sales in February fell 4.1% when compared with January. This is the fourth straight decline and draws some concern that the housing market could be facing some hard times given the surge with mortgage rates. Spring season is the time for home sales and given the low inventory problem, sellers will still remain in control. Surging commodity prices will also derail future housing projects, which means low inventories won’t be changing anytime soon.
Crude prices turned positive after reports that a projectile hit a Saudi Aramco site. Yemen’s Houthis said they were behind the attack. This is the second attack this week and raises concerns that the energy market could see a major attack like the one in 2019 that disrupted around half of Saudi Arabia’s production. The oil market looks like it won’t be able to shake off disruption fears anytime soon and that should suggest prices could continue to rally strongly next week.
Gold prices edged lower as investors continue to pile into stocks and as Treasury yields maintain their upward trajectory. If this bond market selloff continues next week at the same pace, too many companies will struggle with the shock of surging borrowing costs. Gold investors need to be patient, as the outlook over the next few months still looks bullish.
Gold is stuck around the $1950 region and that could remain the theme as long as risk appetite is healthy for stocks. Next week will be huge for volatility given it is quarter end and it seems the geopolitical risk continues to grow. The Saudis had another attack and if this escalation with the Houthis intensifies, the risks to some major oil facilities could grow.
Bitcoin continues to make progress with institutional adoption as BlackRock pointed out that the war in Ukraine is accelerating the need for digital currencies. BlackRock CEO Larry Fink said, “A less-discussed aspect of the war is its potential impact on accelerating digital currencies. The war will prompt countries to re-evaluate their currency dependencies.” BlackRock is studying digital currencies, stablecoins, and technology behind it. Cryptos will change how the world operates and it seems with BlackRock evaluating the opportunity, many investors will try to get ahead of the next rush into cryptos.