Geopolitics and Markets Review 15th July 2022:

Commodities continue their downturn, as oil drops below $100, silver below $19 and gold approaches $1700. Commodities are struggling with the news of potential recession and rate hikes to counter inflation, but supply issues of a lot of commodities could come to exist over the coming years. Will commodities be used against other countries at the end of global trade, and how will countries who can’t get access to these commodities adapt? Only some nations have the facilities to find some important commodities on their own or have the capabilities to go out and get them from other countries and they are your usual suspects, the countries with far-reaching, powerful navies.

Back to rate hikes, and the Bank of Canada announced a 1%, 100 basis point rise, the largest interest rate rise seen from any of the eight major currency central banks. This has led to the belief that the Federal Reserve could follow suit on July 27th at their next meeting to announce interest rate hikes. One fear to consider is hiking too quickly. Although a recession could be on the cards over the coming quarters, with usual signs evident in the market such as an inverted yield curve and reducing consumer confidence, hiking too quickly would create a deeper recession due to reduced growth, or deeper negative growth, regarding the gross domestic product. However, this can only be seen in hindsight and with inflation clocking in at 9.1% earlier in the week, it appears the rate hikes aren’t having a large impact yet on reducing inflation. Will we get an inflationary recession where to stimulate growth, rates must be cut back down again?