A 25-year Wall Street veteran breaks down 2 commodities strategies as prices soar amid


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  • Marc LoPresti is the co-managing director of The Strategic Funds and founder of a law firm. 
  • He lays out a bullish case for commodities despite expecting muted market returns this year. 
  • LoPresti also shares his long-term forecasts for crypto and 5 altcoins he’s keeping an eye on.

Gripped by the prospect of rising interest rates, high inflation, and a war in Europe, dip-buying — a golden rule from the investing playbook that worked to a tee in the past two years — has now become a “dangerous business.”

“It often requires you to call the bottoms but catching falling knives has generally not been a good strategy,” Marc LoPresti, co-managing director of The Strategic Funds, said in an interview. 

Having spent more than 25 years on Wall Street, LoPresti knows a market regime change when he sees it.

After two of the wildest, retail-dominated years in markets, institutional investors are coming back into the fold. The


Federal Reserve

has vowed to raise interests and tighten financial conditions in a bid to tame inflation, which climbed to a 40-year high. The prospect of as many as 11 rate hikes through 2023 already plunged the stock market into chaos, and Russia’s invasion of Ukraine has further stoked


volatility

In some of the wildest swings between gains and losses, the S&P 500 was down 9.4% year-to-date, the tech-heavy Nasdaq tumbled 15.8% for the year, while the Dow Jones Industrial Average declined 7.6%, as of Friday’s market close. 

LoPresti is expecting “more muted” returns across the board this year as investors wade through a choppy market, but he is not ruling out opportunities for alpha. 

“Rather than trying to time precise dip-buying opportunities, we try to apply more macro themes that we know are going to be persistent in terms of their validity throughout the year,” he said. 

2 commodity strategies for 2022

Since the third quarter of last year, LoPresti has focused on the energy sector as an investment theme.

As global economies started to rebound from the pandemic, energy demand picked up significantly while supply remained tight. The structural shortage of oil particularly bolstered the energy sector, which is the only sector in the S&P 500 to have generated a gain this year, with a total return of 32% since 2022 began, according to S&P Global’s daily dashboard.

Since the US and its Western allies sanctioned Russia following its invasion of Ukraine, oil prices have skyrocketed to their highest in a decade. US West Texas Intermediate crude rose 8% in the past week to hover near $114.70. 

The sudden surge in oil prices is tied to Russia’s status as one of the world’s biggest oil exporters. In addition to exporting 5% of the world’s crude oil, the country also supplies 31% of Europe’s natural gas and exports vital commodities including nickel, palladium, coal, and wheat. 

Aside from external catalysts, LoPresti believes that the energy sector will continue to outperform throughout the year. He suggests that investors gain exposure through energy stocks and futures in the oil and gas sector. 

Another emerging theme on his radar is the rise of non-traditional commodities, which refer to renewable energies, agriculture, and even data.

Investors can implement the strategy by purchasing stocks in the energy transition space such as solar and renewable fuels. They can also look at agricultural tech companies, which are poised to outperform as demand for agricultural commodities increases and prices continue to rally, he said. 

LoPresti views data as “commodities 2.0,” which has proliferated in the pandemic-accelerated digital age. 

“As you continue to see the evolution of the Internet of Things and 5G, I would take a look at companies that are in data storage, data management, and data processing,” he said. 

5 altcoins to watch as they start to decouple from bitcoin

As war ravages Ukraine, cryptocurrencies have played a pivotal role in the country’s fundraising efforts. 

Since the start of the invasion, the Ukrainian government and a non-profit organization supporting the military have raised $56.2 million in cryptocurrencies, through more than 106,000 cryptoasset donations, according to on-chain analytics platform Elliptic. The donations are denominated in bitcoin, ethereum, tron, polkadot, dogecoin, solana, and a CryptoPunk NFT worth over $200,000.

After weeks of downward corrections, the market value of all cryptocurrencies initially surged past $2 trillion on the news of their effectiveness as a fundraising tool. The global crypto


market cap

has since declined to $1.8 trillion after fraudsters started to exploit the situation and amid concerns over Russia’s use of crypto to evade sanctions

Despite short-term headwinds, LoPresti remains bullish on bitcoin and ethereum over the long term. 

“We think by the end of the year, you should see a fairly significant increase both in bitcoin and ethereum prices,” he said. “You should probably also see ethereum continue to gain ground against bitcoin in terms of market dominance.”

Amid market gyrations, bitcoin and ethereum have mostly traded in line with risk assets, especially tech stocks. The 60-day correlation coefficient of bitcoin and S&P 500 has reached 0.6.

A 1.0 level would mean that the assets mirror each other’s movements, according to Bloomberg. Meanwhile, altcoins have plunged further following each of bitcoin’s declines. 

In LoPresti’s view, bitcoin will decouple from altcoins as the rest of the crypto market continues to evolve. 

“The decoupling is in the early innings,” he said. “Because of the progress of the decoupling of crypto assets, the market is starting to ascribe more value to the use cases and throughput of some of these altcoins.”

Specifically, he is keeping an eye on protocols that play a key role in powering the growth of decentralized finance, non-fungible tokens, and the metaverse. These infrastructure layer tokens are ethereum (ETH), polkadot (DOT), solana (SOL), avalanche (AVAX), and cardano (ADA). 



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