All major U.S. indexes are now in bear territory, oil rises on supply chain and capacity issues. The market is finally pricing in global stagflation. The U.K. crisis could turn into a contagion if U.K assets are dumped en masse, while the English government tries to spend to offset stagflation. 30 YR gilt is through the roof.
The market is now pricing in stagflation, with all major indices now in a bear market. Oil has risen on the back of capacity shortage ala supply shocks, the uncertainty of the Russian oil embargo and OPEC keeping prices elevated to offset production costs, which are rising, not falling. Finally, nature with Hurricane Ian about to slam into the Gulf of Mexico. Chart 1 shows the S&P 500 now falling through all all of its price supports, with the last support at 3962, the market closed at 3665. With 2020 lows in sight at 3200, very much revealing of how much stimulus juiced this market and now its been, at least with the U.S. Dollar rising and interest rates going up in the U.S., drained out. Chart 2 shows the extent of recent S&P 500 the sell off.
Chart 3 is the oil price, which has stayed elevated despite recession calls from China getting louder which would certainly spill over to a major global economic downturn. How far oil may fall is unknown, but we may never see below $50 a barrel again.
Bonus chart is the 30 yr gilt yield spiking, while the U.K. government tries to spend itself out of stagflation. Anticipation is that the Bank of England will be driving rates higher to offset a wave of inflation.
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