1- #ConnectingTheDots Commodities/Oil & Gas
We are currently in the ~4th inning of an economic slowdown
2- Many lead indicators point to significant contraction ahead
h/t @Kantro
3- The world economy's last bastion, the US Consumer, shows signs of weakness
This is likely driven by lower income groups who used up their savings
4- In China, Covid will suffocate economic activity for most of the winter
We are at the beginning of a big wave that likely peaks in 4-6 weeks
Chinese mobility very likely declines from here
6- Oil & Gas and commodities may be secular winners over the next 5-10 years, but they remain highly cyclical industries
Recently, they diverged significantly from their underlying cyclical trends
7- $XLE $XME $SXPP are well-owned with many "believers". This creates downside risk as economic realities set in
Short term, I see much downside for these sectors
End.