War in Ukraine
The Russia invasion of the Ukraine on February 24th shook up the market outlook. The equities sold off quickly before staging a rally and stabilizing.
Gold filled its role as a safe haven asset – and the price surged above US$1900 for the first time in more than a year. This chart from our February 25 Gold Monitor shows the rise in the gold price due to the geopolitical crisis. Gold exposure in a portfolio continues to be a good diversifier.
Critical Metals
Critical metals prices have moved considerably higher over the past year due to tight supplies and strong demand. Copper and nickel have very low inventories on the London Metals Exchange. Rare earths prices are on the rise stoking a rush to stake claims in parts of Canada. Lithium, which is used in the electric vehicle batteries, is in short supply and there appears to be a supply squeeze. The high concentration of the current supply in China has raised concerns in both the U.S. and Canada as the push for electric cars ramps up. Our February Critical Metals report goes into detail about the tight supply, increased prices as well as the uses for critical metals and rare earths (REE).
Oil
On February 23rd WTI crude oil briefly surged above $100 USD for the first time since 2014 and has since settled around US$95 a barrel since. Western nations have imposed sanctions on Russia which raises fears of supply disruptions from one of the world’s largest oil producers. The oil market remains jittery and could easily start trading over US$100 on a regular basis. This in turn will exasperate the already multi-decade rise in inflation.
Inflation
Rising inflation continues to be a major concern for governments and central banks. The steep rise of essentials, such as gas and food prices, are already stretching consumers finances. And the sticker shock isn’t over yet, major retailers like Walmart used to pushback against manufacturers price hikes but lately have been going along with them, which will mean higher prices at the checkout.
Canadian Housing
House prices in Canada continue to rise with prices climbing double digits in many cities across Canada. The rapid rise of house prices, and subsequently rents across Canada has been alarming for many, especially those trying to buy into the housing market or looking for a place to rent.
Smaller towns and cities are not immune to the double-digit increases. Working from home has made it easier for households to move further away from city centers and into smaller communities and towns pushing prices in these areas higher.
In other news the Pandemic appears to be easing along with mandates. Protests in many cities across Canada have flared up indicating how tired and weary people are of the now two year long lockdowns. The protests have brought out thousands of individuals and blocked major intersections and roads including the Canadian/U.S. border crossing at Ambassador’s bridge in Windsor-Detroit which prevented $700 million dollars in goods from crossing the border each day for more than a week.
Bonus Tip
We continue our recommendation to stay long oil ETFs and have gold exposure!
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