Rapidly warming ocean waters almost ensure an El Niño condition by July. El Nino is a periodic warming of ocean surface waters in the central and eastern Pacific Ocean that disrupts normal weather patterns globally. El Nino patterns can cause droughts in some regions and excessive rainfall in others. This expected episode is much stronger than normal. To wit, Michael Snyder labels it a “Godzilla El Nino.” Assuming it persists through at least year-end, as is typical, it could have a significant impact on farming and fishing and, ultimately, on food supplies and prices.Previously, stronger El Nino conditions have delivered major supply shocks to agriculture, fisheries, and food supply chains by disrupting rainfall and temperature patterns. For instance, some analysts expect the current El Nino to usher in drought conditions for growers in Indonesia, India, and parts of Australia. In Central America, the Caribbean, and Colombia, severe dryness threatens maize and rice crops.It’s not all bad news. If the El Nino shifts the Pacific jet stream south and east, it will likely bring wetter conditions to the southern US and parts of the US Plains. Such a rainfall pattern could be beneficial for some drought-ridden US growing regions. Furthermore, Brazil tends to benefit from El Niño rainfall on its soy crops, and Southern Africa is projected to have above-average cereal output for 2026.The broader concern is the convergence of El Nino with soaring fertilizer prices. The six-to-twelve-month lag in El Niño’s production impact aligns with the lag observed in the Strait of Hormuz fertilizer disruption. Analysts estimate that three to four million tons of fertilizer supply have been cut since the closure. Two independent supply shocks with similar lags are converging on the upcoming crop cycle. Per the Commodity Report via Substack:The El Niño yield hit arrives in 2027. The fertilizer input shortage hits the 2026 growing season that El Niño is already stressing. Two independent supply shocks with similar lag structures are converging on the same crop cycle in the same window.The Wavering BreadthBreadth deteriorated last week. Consider that with the S&P 500 up nearly 1% on the week, half of the sectors underperformed the index by 3.50% or more. It’s worth noting that one of the few sectors to outperform was financial stocks, which beat the S&P 500 last week despite the Fed’s hawkish tone. Typically, a flattening yield curve and the threat of rate hikes bode poorly for financial stocks. Were skeptical that this can continue. Let’s see whether the financial sector can continue to outperform or whether the new Fed reality catches up with it.The second graphic shows the wide dispersion in absolute and relative scores. If you recall, last week’s scores were more aligned near the graph’s center. Industrial stocks have joined technology and transportation stocks in the overbought quadrant. While they are overbought, they are not exceedingly overbought. However, the communications sector is now getting extremely oversold. Meta stock, which accounts for nearly 15% of the sector, is one reason for the sector’s poor performance. The other large contributor, Google, sits around fair value. We break down the sector’s top 10 holdings in the third graphic.Tweet of the DayOriginal Post