Some of the positive and negative issues facing the US and other major economies are:

For the US: 

• The US banking system is still fragile as regulatory capital increases (effective October 1st) mean less ability for banks to lend and those banks with large real estate portfolios (commercial real estate the big headache) are facing large write-downs. Moody’s has downgraded 10 small and midsize lenders. The largest entities in the list include US Bancorp, Bank of NY Mellon and State Street Corp. More downgrades are expected and the pressure on deposits of regional banks continues. Banking stocks (large through small) have been hit in recent weeks.
• The recent inflation data has helped the CPI and PPI data, but the recent rises in crude and natural gas prices and rising interest rates will produce higher levels for these key economic indicators in the near future. July core CPI came in at 4.7% and we see this rising over 5.5% in the coming months. 

For the rest of the major economies in the world:

• China is facing a difficult economic period as exports fall and domestic spending by consumers withers. Some of their real estate companies are again facing refunding problems and have not made their interest payments. The 30-day forbearance period is now on the clock. If payments are not made in time then there will be more pressure on their economy and real estate prices. China has stopped reporting unemployment among young people after record high readings over 21%.
• Russia’s currency hit a 12-month low to the dollar and Russia needs to keep resource sales as high as possible to meet their fiscal and military needs. Russia raised its key interest rate by 350 BP to 12% to counter this weakness. 
• Rice prices in Asia have risen almost 50% due to smaller harvests and India restricting white rice exports (70% of global trade). Rice is an important part of the diet of billions of people in Asia and Africa (42 countries). Feeding people at reasonable prices is likely to be a challenge later this year. 

The war in Ukraine is seeing more escalations as one side hits the other. This is now spreading to daily drone attacks on Moscow by Ukraine and the Black Sea Ukrainian export ports being blockaded and attacked by Russia. A lot of the grain infrastructure at the export Ukrainian ports has been severely damaged. Ukraine is trying to route grains and oilseed products via rail and trucks but this cannot make up much of what had been transported by ships.

Some recent events: 

• Ukrainian drones hit Russian factories producing parts for a new long range bomber. The accuracy of their attacks is due to more and more NATO weapons and targeting data.  
• Ukraine now has used seaborne drones to attack Russian ships (focusing on tankers) in the Black Sea near Crimea.
• Belarus is getting its military upgraded by the Wagner group and these revitalized forces (Wagner and Belarus troops) have moved close to the Polish border. Poland in return has deployed an additional 12,000 troops to counter this, doubling its forces in the area. 
• Romania is worried that attacks on Ukrainian ports across the Danube river could hit their lands. It is a NATO member so if directly attacked then this would bring NATO directly into the conflict. Some damage has occurred on the Romanian side of the border as debris from attacks on the Ukrainian side of the border hits farms on the Romanian side of the Danube border. 

Market Movement:  We are watching the 33,600 level for the Dow (today at 35,031), which if breached would complete a topping formation for the Dow. A close below 32,600 would set up the waterfall decline phase to below 30,000. Stay patient with cash reserves and be ready to BUY at the next low risk entry point. Don’t get trapped by this current euphoria. 

Get ready to be buyers once this expected correction has lowered stock prices and fear has returned to the markets. The S&P Energy Bullish Percent Index is still at the recent high reading  of 91% bullish. For traders this means they may want to take profits. Our view is to wait for the next low risk BUY window as we see much higher prices in the years ahead and want to build positions for the commodity super cycle that we see lasting into the end of the decade. As the general stock market declines we expect energy prices to back off and the Energy Bullish Percent Index retreat back to below 10% and ring the bell for the next BUY window. The last BUY signal was in March and we added 14 new ideas to our Action BUY List.

Once the general stock market is oversold again and energy stocks retreat we expect to add additional energy investment ideas. Many energy stocks are down over 50% from their 2022 highs, and many trade again below Proved Developed Producing (PDP) Reserve valuations levels. If you want to see what our subscribers are looking at, sign up now for access to the Schachter Energy Research reports.