08.03.2022 – We venture an outlook on the Ukraine war and upcoming stock market events. Contrary to prevailing opinion, we believe: Kiev can win. We advise all traders to keep powder dry.
Continuing agony
At the moment, the world still assumes that the conflict will drag on for an agonizingly long time. And that Ukraine will be out as a major wheat supplier for a while yet. You can see that in the wheat chart. An escalation of the crisis is also likely to push the prices of commodities such as oil, aluminum, nickel or palladium further north.
Source: Bernstein-Bank GmbH
Russian victory – slow normalization
Most stockbrokers also assume a Russian victory. Then commodity prices would normalize and, as in the case of wheat above, gradually return to the 200-day line. Already, major Wall Street banks are preparing for a return of Russian assets. JPMorgan, for example, published an analysis last Friday with this title: “Russian Corps: If Ifs-And-Buts-Were-Candy-And-Nuts Recovery Analysis; Move LUKOIL, NLMK, MMK to OW.” In it, the bank upgraded corporate bonds of Lukoil, Novolipetsk Steel and Magnitogorsk Iron & Steel to Overweight. Goldman Sachs is also said to have bought bombed-out Russian bonds.
A broken army
But: the Russian army has apparently become a victim of its own ailing system. The evidence we have found in the meantime indicates that corruption is rampant in the procurement system. While high-ranking generals afford ostentatious mansions, field rations for soldiers have sometimes been in disrepair for years. Russian soldiers in Ukraine loot stores because they are hungry. Tires are brittle. Tanks stop because there is no gasoline. Supplies are poorly organized – and right on their own doorstep. Communication does not work because the invaders have cleverly destroyed radio towers. The morale of the troops is said to be lousy – why are the Russians attacking their brother nation? Moreover, no one in the inner circle dares to bring such news to Putin. Now we wonder if the Russians are running out of ammunition.
Ukraine’s victory – mega stock market reaction
Time is playing for Ukraine. If arms shipments from the West arrive, if tightened sanctions drain Russia, this war will be hard for Moscow to win. Watch the real-time news for reports of advancing fresh, highly motivated Ukrainian reservists – if they exist – and a victorious foreign legion: reportedly 16,000 free-armed Westerners want to fight for Ukraine. At the latest, if you see pictures of Russian units surrendering in droves, it’s time for calls on Wall Street and the DAX. And for puts on the above commodities. We wish you good luck – Bernstein Bank keeps an eye on the matter for you!
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