THE FINANCIAL MARKETS – WHAT’S OCCURRING
It is still all about the WAR!!!!
It is also about QE. In my strong opinion, the stock indices/markets have rallied to Bubble levels because of the money printing. Therefore once it is withdrawn the prices have to revert.
MARKETS ARE MOVING BASED ON HEADLINES- SANCTIONS, BLOW BY BLOW UPDATES ON FIGHTING (LAND TAKEN AND LOST).
FEAR OF LONGTERM INSTABILITY PUSHING INDICES LOWER, HOPE OF RESOLUTION AND CONTAINMENT MOVING THEM HIGHER.
Above is what I said last week and things remain the same!!!! I do not see an improvement in Global Indices until there is a resolution.
The more tit for tat sanctions that occur, the more world economic growth slows.
Slow growth/recession is anathema to rising stock markets!!!
I had kind of dismissed the Russian economy, equating it with Italy. The control it has over “rare earth metals”, oil and gas, makes them much more relevant.
The oil price is inflationary. Oil price shocks historically have brought on recessions.
Raw materials price increases are inflationary.
Will this price volatility across all markets cause Financial Stress?
“We all see what’s going on with oil, gold, euros and rates. Here’s what you don’t see. Someone is on the wrong side of every one of those trades. They’re losing billions. This results in the failure of hedge funds and banks. Takes about a week for bodies to float to the surface.”
Global sanctions ruin economies – Iran, Afghanistan, Iraq, N. Korea…..soon to be Russia.
Economy
Inflation in February 22 was 7.9% higher than February 2021.
Central Banks must do something about this. The traditional tool to deal with inflation is Increase Interest Rates. ECB on Thursday commenced bond buying tapering and mentioned increasing rates later in the year. This is a very tardy approach to dealing with inflation. Imho they are dragging their feet and do not have the courage to deal with the current issues. They are still fighting the Covid support battle. Growth was improving and economies were (before Russia) getting back to pre-March 2020 levels. Inflation is an economic killer.
“Over time, the three biggest factors that tend to drive the U.S. economy into a recession are an inverted yield curve, some kind of commodity price shock or Fed tightening,”
Fed watch
Powell made it clear to Congress that rate would be going up and Quantitative tightening would occur. The FOMC (Federal Open Market Committee) meets on Tuesday/Wednesday with the announcement of their Monetary Policy at 7 pm Irish time Wednesday. Powell will hold presser at 7.30.
.25% increase in Fed Funds rates is expected. And a signal that they will increase by similar for the next coming meetings is priced in. as is QT, imo. Maybe the market gets a shock from it actually happening, but I don’t think so.
Bonds
Yields are starting to reflect the reality of higher short-term rates. Yields are getting back to 2% in ten years.
Junk bond yields are rising.
Credit markets are a sign of financial stress. Who owns Russian bonds? Peeps sell their good stuff to pay for bad.
Gold rallied and broke out of its range. Gold is a hedge against Inflation and the safest of safe havens. ATHs did not last long. Now back below 2k. Not worth playing as it is too War news dependent imo
Stock market
Markets are going lower because the valuations of tech were exaggerated due to- too much money in the system(money flows around stock markets like water), competition for funds from higher returns from safe investments like US treasury’s and profit taking.
World Wars lead to instant recessions.
DO NOT CATCH FALLING KNIVES!!!
My stock bearishness is now being modified, a gent from our Investing Course has convinced me!!, to start looking for well priced, good companies to Invest in. The March 2020 low looks a good place to buy but only for profit making cos with a good track record. None of the Tech rubbish that sprung up in the past 2 years.
DocuSign was down 20% on Friday!!
2021 was a year of IPOs- all availing of the free money. There has been none in the past 6 weeks.
One thing Investors could watch out for is takeovers of some of these non profit making businesses
This would be a new (cycle) closing low here for $ARKK
Watch out for cos with investment in bitcoin, and ev cos (Amazon has shares in Rivian- go figure?). Avoid tesla imo (money in bitcoin)/ overvalued still.
SPOOZ
“Bulls stepped in where they had to preventing a loss of the key 4195 zone and its deja vu as we are *yet again* back near that 4260 magnet zone. it doesn’t stay away from this zone for long”
Europe
YIKES
Technical Analysis Only 1 pattern matters now in #ES_F: A perfect triangle with 4140 support & 4400 res. Breakout determines next big trend Next week: Bulls get 1 last shot at support, needs to clear 4240 to trigger to 4400. If it fails & 4140 lost, its a short to 4050, 3990
Watch out for FED on Wednesday 7pm
US clock has gone forward.
Colin 01-6644034 0851722729
Risk management is vital.