by | Jun 13, 2022 | Newsletters

Over the past month, we saw more worrying inflation data even though job creation remains high. The continuing war in Ukraine is beginning to take a back seat to the main concerns of the public. However, the events on the Russian-Ukraine front are leading to food shortages, in particular, wheat as Russia keeps Ukraine ports blocked.

Certain commodities continue to suffer high demand and price pressure. Natural gas prices rose another 16% over the month of May. While wheat futures, quoted on the Chicago Board of Trade, rose by nearly 8%. 

On the other hand, precious metals were mostly flat throughout the month with low price volatility. Gold declined by 2.5% during the last month along with silver also down, by 4%. 

Crude oil continued higher over May with new sanctions for Russian oil on the horizon. WTI crude oil reached a recent high of $118.90 per barrel, and is up 10% for the month of May.

The S&P 500 began the month with sharp drops as the broad stock market index head further south on the back of fears of an economic slowdown. However, in the last days of May, the S&P 500 managed a rally gaining almost 10% from its intra-day low on May 20, at 3811. Although it is still early to determine if the stock market has bucked its recent bear trend. 

Bitcoin Reverses Negative Trend

Bitcoin has had a volatile month, something cryptocurrency investors have gotten used to. As of writing, the king of digital currencies had gained 8.56% over the past month, reaching levels well above $31,000.

Prices had been falling consistently, previous to comments from JP Morgan. In fact, most of last month’s gains came in the last two days. Although it’s not easy to attribute the recent performance of Bitcoin to Jamie Dimon’s comments as they came on the 26th.

However, Bitcoin had been suffering a long decline with extra bad news added to the general negative sentiment for crypto. Terra stablecoin experienced a total collapse midway through the month and has nearly wiped out its entire value. 

The Terra stablecoin was pegged to the US dollar and it was supposed to bring stability to a highly volatile cryptocurrency world. The panic started when an account offloaded $350 million Terra stablecoin. 

The value of the digital coin was pegged at around $1.00 and within a few days found itself trading just above five cents. The stablecoin is trading at $0.033 at the time of writing, and pundits are doubting if it will ever regain its peg since trust in the Terra protocol may be broken.

Graph displaying S&P500 index values over time.

Source: TradingView

So, it may have taken a few days for investors to assimilate Dimon’s bullish comments. JP Morgan stated that their preferred alternative asset was cryptocurrency, replacing their previous preferred alternative asset which was real estate. The leading US bank also estimates that Bitcoin is undervalued by 28% at current prices.

Real Estate Continues to Lag

From the real estate sector, the month of April showed another decline in Existing Home Sales. The latest data was the third successive decline in home sales, falling by 2.4% to levels not seen since June 2020. Maybe JP Morgan has a point?

However, these levels are still far away from the pandemic levels of 2020 when existing home sales bottomed at just over 4 million. Notice that the trough also coincided with the small crash in the broad stock market over the same period.

Need Portfolio Protection?

Markets are unstable, and the efficacy of broader monetary policy initiatives to rein in inflation and ameliorate macroeconomic concerns are yet to be determined. To reduce risk and uncertainty in your investment portfolio, consider investing in gold or silver today through a self-directed IRA.

 

Gino D'Alessio

Gino D'Alessio is a Broker/Dealer with over twenty years experience in various OTC markets such as Bonds, FX and Derivatives. Currently a Financial Markets and Investments Writer & Analyst

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