29.03.2022 – The bulls’ run continues, the optimists have been proven right in recent days. The US investment firm Academy Security believes that the negative factors of the Ukraine war are largely priced in. The same is largely true for the Federal Reserve.
Academy Security is a financial boutique founded by veterans of the US military. It also provides geopolitical analysis. We think: Military background knowledge is not a bad prerequisite in these times. Analyst Peter Tchir just went to sort out the “market mess” a bit. On the stock market, he commented that the markets had priced in enough good news on the Ukraine war that its occurrence could still have a big effect on prices. We translate: The stock market has cleverly as always anticipated developments on the front. We wonder whether a ceasefire and normalisation are completely priced in, and whether the stock market will then switch to “sell the news”. In the daily chart of the Nasdaq 100 with Bollinger bands. Or whether prices will then start to storm to old heights.
Source: Bernstein Bank GmbH
In any case, the expert from Academy Security stated that Russia is concentrating on the Donbass. At first, this was good news, because Moscow had probably downgraded its goals – however, a further advance towards the West could follow. Then the hope: “The tide continues to turn in Russia against Putin and the invasion, which might be enough for him to start pursuing talks that lead to something that he can claim as peace, which would be very positive.” Tchir’s conclusion: “Caution on risk while slightly optimistic the worst of the war is close to being behind us!”
Interest rate fear ticked off
The market is likely to fear the Fed more than the Ukraine war at the moment, it added. Regarding the Federal Reserve, the expert from Academy Security indirectly complained that it talks too much about fighting inflation and acts too little. Now an interest rate step of 50 basis points in May was crucial. All in all, the expectations of interest rate hikes are already quite excessive – and they are already reflected in the prices.
Quantitative Easing will be decisive
However, it will be exciting on 6 April when the Fed minutes are published – then there should hopefully be details on the topic of quantitative tightening. QT could damage asset prices more than expected so far. However, the expert does not believe in a soft-landing scenario. The two-year and ten-year government bonds signalled a recession.
Our 50 cents: If this analysis is correct, the Ukraine war and Fed rate hikes are in the prices. So two bearish scare scenarios are gone. What remains is the threat of recession and quantitative tightening – although there is likely to be only one of the two factors. For if the Fed also fears a deflationary shock at some point, it is likely to call off the QT. The matter remains exciting – Bernstein Bank is keeping an eye on the matter for you!
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