Barron’s Weekend Summary: he integration of global markets that enabled the West to punish the Russian economy in response to Putin’s aggression is leading to higher costs at home, chiefly through rising oil and gas prices, snarled supply lines, and scarcer goods
Cover Story:
-The integration of global markets that enabled the West to punish the Russian economy in response to Putin’s aggression is leading to higher costs at home, chiefly through rising oil and gas prices, snarled supply lines, and scarcer goods. Consumers are just starting to feel the negative effects in the U.S. and Europe, and they will worsen. The war and the response to it could help diminish living standards throughout the West, even as the military conflict reshapes the geopolitical landscape. But globalization, a hallmark of today’s geopolitics, in some form is here to stay.
Interview:
As vice chairwoman of Carbon Direct, a firm that invests in climate technology and supports companies in meeting their decarbonization commitments, Nili Gilbert is tackling one of the hardest problems of all: climate change. Gilbert’s journey from portfolio manager to decarbonization champion took root in college when she had the opportunity to design her own course of study. She focused on the interplay between social and cultural progress over time, and economics and markets. After starting her career in international development at Synergos, Gilbert discovered the world of quantitative investing.
Tech Trader:
Shares of Apple are about flat since the NASDAQ Composite peaked in November. But, that’s a good thing, given the sharp double-digit stock declines for the rest of the tech giants. In part, the market has seen Apple shares as a place to hide, a stable business generating mountains of cash and returning gobs of it to investors. Last week, Wall Street went a little gaga over Amazon.com ’s $10 billion stock repurchase, which was paired with a stock split. Apple has been returning nearly that much to shareholders every month via dividends and stock buybacks.
The Trader:
-Headlines about stagflation are everywhere, and the “flation” part of the equation is pretty obvious. February’s consumer price index arrived this past week, and it was as bad as expected. The CPI rose 7.9%, up from 7.5% in January, while core CPI, which strips out food and energy, rose 6.4%, up from 6%. And the University Of Michigan Index Of Consumer Sentiment pointed to the highest inflation expectations since 1981.
-The market had plenty of reasons to fret. Russia showed no sign of wanting to end its war on Ukraine and appeared ready to escalate attacks, not halt them. In response, the U.S. said it would remove “most favored nation” trading status from the country and blocked Russian oil imports. U.S. corporations, including Goldman Sachs Group, McDonald’s, and JPMorgan Chase, continued to flee.
Features:
Stock buybacks are back—and that’s good news for investors trapped in a volatile market. This past week, two companies that have very different histories with share repurchases announced big buyback plans. Amazon .com, which hadn’t bought back stock since 2012, said it would buy back $10B in shares, while General Electric, which had squandered billions buying back stock before CEO Larry Culp took over the fallen industrial titan, announced plans to repurchase $3B worth of shares.
European Trader:
Russia’s attack on Ukraine means Europe’s military capabilities are in focus, and as a consequence of President Vladimir Putin’s aggression, some defense stocks may be set to benefit. Two companies that derive the greatest share of their revenue in terms of weapons and ammunition—areas that traditionally benefit from increased demand during conflicts—are German arms manufacturer Rheinmetall at 22%, and British defense giant BAE Systems, at 20%. Law also cites U.K. defense firm Chemring Group, a maker of flares that act as decoys for heat seeking missiles, as having indirect exposure to the conflict since it provides parts for weapons but not the actual weapons themselves.
Emerging Markets:
Emerging market indexes should be jumping this year since commodities, particularly oil, have shot up as the conflict between Ukraine and Russia eventually devolved into war. For the year, Brent crude oil alone is up just over 40%. The Bloomberg Commodity Index, which tracks commodity futures including energy, grains, and precious metals, has gained 26%. But the emerging market stocks aren’t jumping as much as history says they should. They’re either losing or chalking up gains that, as history shows, are disappointing. An example of each: the MSCI Emerging Asia Index is down about 12% for the year, but should be up 11%—theoretically. And the MSCI Emerging Markets Latin America Index is up 14%, but should be up 18%.
Commodities:
Nickel prices, for the metal not the coin, spiked to $100,000 per metric ton on the London Metal Exchange this past week before trading was halted. The metal had traded around $25,000 a ton before the run-up, when it cost the U.S. Mint more than five cents to make a nickel.
Streetwise:
Jack Hough loos at the role of cryptocurrencies and the war in Ukraine: “The government of Ukraine, you might have heard, put out a call for crypto donations to fund its defense against Russia’s invasion. It has raised an undoubtedly helpful $63 million. But crypto scammers have bilked Ukraine supporters out of a similar amount. Donations in traditional currencies, meanwhile, are pouring in just fine. And Ukraine must convert its crypto to fiat to spend it on useful things. Keep the crypto flowing, by all means, but let’s not call this a pivotal moment in monetary history.”