• Investors have become accustomed to the US stock market outperforming the rest of the world. This was especially true during the pandemic when US companies like Alphabet, Microsoft, and Amazon, which are online-platforms, saw accelerated growth. Important to remember, however, is that non-US markets have the ability to outperform too. From 1950-2010 US stock had total return of 6.9% above inflation compared to 7.6% for the rest of the world.
• European bank stocks in the Stoxx Europe 600 index dropped 45% from 2011 to the end of 2020 while the index itself rose by roughly the same amount. However, this year these bank lenders are the best performing group, rising around 10% so far in 2022. One Bank of America analyst even estimates that ever 1% increase in yield could add 23 billion euros to the earnings of these low-valued banks.
• From 2017-2019 the correlation between bitcoin and the S&P500 was 0.01, which implied their prices moved independently. Recently, the correlation has increased to 0.36, moving towards a perfect correlation of 1. As the correlation becomes more apparent and it moves more in line with equities, bitcoin will offers less diversification unlike gold, investment grade bonds, and currencies.
• If the Russia-Ukraine tensions continue to escalate it could have a direct impact on some commodity markets. Russia currently supplies 50% of the EUs imported natural gas and produces 11 million barrels of oil each day. Additionally, Ukraine accounts for around 12% of global exports of wheat and 16% of global exports of corn.