Macro Briefing: 26 September 2022

* US warns Russia of ‘horrific’ consequences if nuclear weapons used in Ukraine
* Far-right leader looks set to become Italy’s next prime minister
* Tropical Storm Ian, expected to become hurricane, heading to Florida
* British pound tumbles to record low vs. the dollar
* War in Ukraine to cost global economy $2.8 trillion by 2023’s end: OCED
* Buying the dip isn’t working this time… at least not yet
* US business activity continued contracting in September via PMI survey data:

Inflation’s still the main worry for the stock market, advises an analyst. “This year’s uncomfortable drop in the stock market likely isn’t over anytime soon,” says Yung-Yu Ma, chief investment strategist at BMO Wealth Management. “The reality is a heavy cloud will continue to hang over equities in the coming weeks and months until inflation eases significantly.” But the slide represents an opportunity, explains Eric Diton, president and managing director of the Wealth Alliance: “For long-term investors, these are the opportunities that we sit and wait for to buy equities at advantageous prices. Bear markets don’t come along that often.”

Commodities prices continued falling last week, dropping for a fourth straight week, based on CRB Index. A key commodity — crude oil — fell on Monday, suggesting more dowside ahead. “The unrelenting pressure on commodities, including crude oil, continues following Friday’s gloomy session which saw accelerated dollar strength and growth pessimism cause a ripple through markets,” says Ole Hansen, head of Commodity Strategy at investment bank Saxo.

The end of “free money” will change investor preferences. “A rising tide lifts all boats, even those that aren’t very seaworthy,” says Robert R. Johnson, professor offFinance, Creighton University. “The end of free money means that investors are becoming more discerning and demand that potential investments have a sustainable business model and are cash flow positive or have a path to being so.”