Barron’s Weekend Summary: Food prices were rising even before the war in Ukraine, hurt by pandemic-related disruptions on top of devastation from more frequent and severe weather catastrophes.
Cover Story:
Food prices were rising even before the war in Ukraine, hurt by pandemic-related disruptions on top of devastation from more frequent and severe weather catastrophes. Nearly one in three people worldwide—or 2.3B people—didn’t have access to adequate food in 2021, up 350M from pre-pandemic levels, according to the United Nations. An estimated 702M to 828M people in the world faced hunger, up 150M from pre-Covid levels.
Interview:
-Richard Bernstein has spent his 40-plus year career focusing on the macro picture. Following stints at E.F. Hutton and Chase Econometrics/IDC, he moved to Merrill Lynch in 1988, as interest rates climbed under newly appointed Federal Reserve Chairman Alan Greenspan; Bernstein rose to chief investment strategist for the bank. In 2009, he set out on his own, founding Richard Bernstein Advisors.
Tech Trader:
The world’s most important tech companies all reported their quarterly results this past week, and, in each case, the damage from a slowing global economy was in stark evidence. The witch’s brew of rising interest rates, higher fuel costs, the Russian assault on Ukraine, lingering supply-chain issues, and the U.S. dollar’s surge is infecting every tech business. “We’ll all go together when we go,” as the great Tom Lehrer once sang. Financial calamity is the great equalizer.
The Trader:
-3M has had a terrible run in recent years. Since peaking in 2018 at almost $260, its shares have fallen some 45%. It has been plagued by falling profitability as well as legal issues that could burden it with billions of dollars in liabilities. The company started to address some of those problems this past week. Its stock jumped 4.9% on Tuesday after it reported second-quarter earnings. The numbers weren’t great, and management cut its full-year profit guidance, citing a strong U.S. dollar and an uncertain macro environment.
-The recent bear market hit small-capitalization stocks particularly hard. The Russell 2000RUT +0.65% index dropped 32% from its all-time closing high in November through its June 2022 low. That’s far worse than the S&P 500SPX +1.42%’s 24% drop from peak to trough. But it makes sense. Small companies are hit harder by rising rates and a slowing economy than their larger counterparts, and it has been a long time since the Fed has been forced to raise rates as quickly as it has this year.
Features:
-Fair-minded analysts, including some who have been leaders in the responsible investing space, raise legitimate shortcomings about current ESG practices. They point out that the data provided by companies often doesn’t give investors and ratings agencies enough reliable information. That makes it difficult to judge companies’ performance. They also rightly push for companies to go beyond announcing goals and instead provide clear action steps for achieving them.
-Clean-energy policies, including tax credits, encourage investment and job creation, said a GM spokesperson. “Clean energy policies that accelerate the adoption of electric vehicles will establish the U.S. as a global leader in electrification today and into the future.” The corollary is that failing to promote EVs here could leave U.S. car makers at a disadvantage relative to rivals overseas as the world shifts away from internal-combustion engines.
European Trader:
Norwegian conglomerate Orkla is unusual in that it owns businesses producing both. The former industrial giant transformed itself into a consumer-goods company and earned about 37% of its 2021 revenue from its core food business making frozen pizza, sauces, and ready-to-eat meals. The Oslo-listed stock also owns legacy hydroelectric power stations.
Emerging Markets:
-Even as it rolls out modest infrastructure and lending policies, and grapples with a severe property crisis, China’s top leadership on Thursday again signaled that a large-scale stimulus was not on the way to rescue its distressed economy. Chinese markets took the news negatively, falling across the board Friday, after the country’s highest decision-making body, the Politburo, met for a high-level economic meeting, chaired by President Xi Jinping.
Commodities:
-High inflation and monetary tightening are finally hitting consumer and industrial demand, which is “resulting in some demand destruction for most commodities and alleviating some of the upward pressure on prices,” says Matthew Sherwood, senior lead commodities analyst at the Economist Intelligence Unit. Most commodities prices are likely to “ease gradually for the rest of this year and next.”
Streetwise:
-In the Streetwise podcast, Jack Hough wonders whether the bear market is over: “The S&P 500 is up 10% from its low point – a top market strategist shares why it could be a mirage. Plus, recession-proof investing tips from a seasoned fund manager.”