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. S&P Global has joined Moody’s in downgrading banks. Some of their notable downgrades were: KeyCorp., Comerica and Valley National Bancorp. Banking stocks (large through small) have been hit in recent weeks. For example, Bank of America is down 14% over the last month. 
• US Retailers are getting smacked down in the market as sales slow down and profits plummet. Recent disasters include: Foot Locker (down over 30%, Peloton (down 25%) and Dick’s Sporting Goods (down 24%) when they reported. Part of the problem was inventories that did not sell and many reported record shrinkage or theft, as a big impactor on their recent quarterly results. Stores are shutting across the country due to the lawlessness and no action being taken to stop this.
• Recent Federal Reserve minutes showed that rate hikes for this year  may not be over. 
• The recent contract deal by American Airlines pilots will worry the Fed as it included first year raises of 21% and over four years of 46%. Wage inflation is a key factor in Fed consideration when they set rates. The next major unions with wage negotiations are the US auto companies where the unions want large wage increases, an end to the two tier of employees and job guarantees as the companies switch over to EV’s which need less labour. 

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 and shadow non-bank financial entities are facing interest payment arrears and refunding problems. These are very large potential defaults and many have bonds trading at very distressed levels of pennies on the dollar. Total debt of these entities are in the 100’s of US$billions. China’s Evergrande filed for bankruptcy for its US assets last week. It has over US$300B of liabilities. The Yuan is under pressure and will need stabilization by their Central Bank. Currency controls could be put on. 
• 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. It appears that this has stabilized the rouble for now. 
• Canada saw its Core Retail Sales fall 0.8% in June as consumers face inflation pressure and pull in discretionary spending.
• German business activity has shrunk again. The Purchasing Managers Survey fell to 44.7 in August from 48.5 in July. Below 50 is contraction and this decline was faster than forecasts. 

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 grain 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 via Romania and Moldova, but this cannot make up much of what had been transported by ships.

Some recent events: 

• Ukraine continues to use seaborne drones to attack Russian naval ships (also focusing on crude and product 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  and Baltic borders. Belarus has warned that they will attack their neighbors if offensive action is taken against the country, either militarily or via sanctions. The threat includes use of hypersonic tactical nukes.
• The US has implemented a convoy system from Romania to get grain shipped there from Ukraine to get to the Mediterranean Sea and to customers. 
• Drone attacks against Moscow are becoming a daily occurrence and may result in some kind of escalation by Russia that is now expected to begin shortly. The airports around Moscow have faced regular closures. This could become a serious escalation. Russian media daily talks about the use of tactical weapons that have been upgraded by Iran with greater accuracy in hitting their programmed targets in Ukraine. 
• The US now sees the death and casualty toll in Ukraine at around 500,000. Russia’s toll at 300,000 (120,000 dead and 170,000 injured). Ukraine’s figures are 170,000 (70,000 killed and 100,000 wounded). With Ukraine having only 500,000 troops this is a high percentage of their military. Russia is seen as having 1.33M in uniform and has over three times the population (143M versus Ukraine’s 44M people). 
• Russia reported today that a passenger plane crashed in Russia, killing all aboard. The Wagner paramilitary group’s owner, Yevgeny Prigozhin was one of the deceased. Was this an instrument/mechanical failure or a successful assassination? 

Market Movement:  We are watching the 33,600 level for the Dow (today at 34,420), 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 to 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.