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04.07.2022 – Wall Street closed the worst first half of the year in decades. Adjusted for inflation, it was even the biggest loss since 1872. A bad omen: this year marked the fall into the so-called Long Depression – also known as the Founders’ Crash.

What a first half of the year: the S&P 500 lost about 20 percent – the worst since 1970. It almost broke the then all-time record of minus 21 percent in the first half of the year. Pictured is the daily chart of the SPX showing the 50-day moving average.

Source: Bernstein Bank GmbH

The Nasdaq Composite posted its biggest drop ever, losing 29.5 percent. The Dow Jones slid 15.3 percent to its worst level since 1962.

The biggest loss since 1872

But it gets worse: Michael Hartnett, chief investment strategist at Bank of America Securities, adjusted the S&P 500’s absolute numbers for inflation. The nominal dollar losses get even bigger when the shrinkage of dollar purchasing power is factored in. And so Hartnett concludes that U.S. stocks are having their worst year since 1872. The situation looks just as bad for bonds: For Hartnett, 2022 is the worst year so far since 1865, with a 15.4 percent drop, and the year-over-year loss is double that. And that’s without inflation adjustment, because that doesn’t work when comparing to various other currencies.

Boom of the founding era
The annual figures should make us sit up and take notice. At the time, the U.S. was recovering from the Civil War and was using government money to drive the railroad conquest of the West, in part to reunite the fractured country. This led to over-expansion and a speculative bubble in the U.S. economy. In Europe, the parallel victory of the German Empire over France, with its reparations, had led to the euphoric and speculative boom of the Founding Era.

The Long Depression
The Gründerkrach was also triggered by the end of the silver standard in Germany: the Reich stopped the production of silver talers and introduced the gold standard. The U.S. also took this step, hitting the mines in Nevada in particular. De facto, this created a deflationary shortage of money, and the silver decision went down in history as “The Crime of 1873” – forcing the Panic of 1873. By 1879, the Depression was raging, even surpassing the duration of the Crash of 1929, according to the National Bureau of Economic Research. The crisis is also known as the Long Depression – some researchers even date it to 1896. Ten U.S. states, 89 railroads, hundreds of banks and 18,000 companies went bankrupt in the U.S. alone.

Acute risk of recession
If we look again at the current situation, there are some deflation signals. For example, the Federal Reserve Bank of Atlanta’s economic tracker slipped to minus 2.1 on Friday. Bank of America lowered its GDP forecast to zero. Zero interest rate policy and Corona supports have provided a flood of fresh and cheap money in recent years – which triggered a boom on credit. Now, the energy transition and the Ukraine war are driving prices even higher. In addition, the central banks are tightening the supply of cheap money again as a result of the interest rate turnaround. The question is when high inflation will choke off the economy and tip over into a deflationary recession.
Our conclusion: if history repeats itself, the crash in stock prices has just begun. So watch out for the recession signals – Bernstein Bank wishes you good luck with your trades and investments!

Important Notes on This Publication:

The content of this publication is for general information purposes only. In this context, it is neither an individual investment recommendation or advice nor an offer to purchase or sell securities or other financial products. The content in question and all the information contained therein do not in any way replace individual investor- or investment-oriented advice. No reliable forecast or indication for the future is possible with respect to any presentation or information on the present or past performance of the relevant underlying assets. All information and data presented in this publication are based on reliable sources. However, Bernstein Bank does not guarantee that the information and data contained in this publication is up-to-date, correct and complete. Securities traded on the financial markets are subject to price fluctuations. A contract for difference (CFD) is also a financial instrument with leverage effect. Against this backdrop, CFD trading involves a high risk up to the point of total loss and may not be suitable for all investors. Therefore, make sure that you have fully understood all the correlating risks. If necessary, ask for independent advice. CFDs are complex instruments and are associated with the high risk of losing money quickly because of the leverage effect. 68% of retail investor accounts lose money trading CFD with this provider. You should consider whether you understand how CFD work and whether you can afford to take the high risk of losing your money.7

01.07.2022 – For quite some time, the trend in cocoa has been running aimlessly sideways. In the short term, however, smaller waves have repeatedly formed, inviting traders to surf from intermediate highs to troughs and back again. Hardly any other product is so torn between the factors of impending recession, problems at producers, inflation and global population explosion.

You can see the contradictory situation very nicely in the weekly chart. The price oscillates indecisively around the 50 line. And again and again there are well tradable, short-term trend lines.

Source: Bernstein Bank GmbH

The picture is the way it is for good reason. Because when it comes to fundamentals, we see a tug-of-war between bulls and bears.

Bullish: Poor Harvest
Exporters suggest, according to industry service Trading Economics, that farmers in Côte d’Ivoire shipped about 1.97 million tons of cocoa beans to ports from the previous October 01 to the end of June this year. This is down 4.9 percent from the previous year. In neighboring Ghana, production fell dramatically to 800,000 tons from the previous record harvest of 1.047 million tons.
Both countries are the absolute top producers, accounting for over 60 percent of global supply. Harvests here fluctuate because of misuse of pesticides, infestation with fungi, groundwater levels and government destruction of illegal farms in the rainforest. Other major producers include Indonesia, Nigeria, Cameroon, Ecuador and Brazil. At around 5 million tons, cocoa is the world’s smallest soft commodity.

Bearish: oversupply
Despite falling supply, prices are under pressure, according to “Trading Economics.” This is because the warehouses of traders registered with the Intercontinental Exchange (ICE) in London are significantly better filled than in the previous season. Fittingly, global lobby group The International Cocoa Organization (ICCO) reported the 2020/21 season has resulted in a global oversupply of 230,000 metric tons – the largest since the 2016/17 season.
Bearish: tight budget
In addition, as inflation soars, the ICCO warned of falling global demand in non-essential goods and luxury items. And this includes cocoa and all its sub-forms, especially chocolate.

Bullish: Corona opening and population explosion
However, ING Economic and Financial Analysis pointed out that the reopening of economies in the post-Corona world is constructive for demand. Investing.com already positioned itself bullish a few weeks ago: the movement in other soft commodities such as coffee, sugar or orange juice also points to an upward breakout in cocoa. There are good reasons for this assumption: First, the world population is growing by around 20 million people every quarter, which supports demand.

Bullish: Inflation
In addition, according to Investing.com, the highest inflation in four decades is raising production costs for wages, fertilizer and transportation. This, it says, is putting upward pressure on prices as farmers add costs to the product. We add: In fact, the all-time high in 1977 was nearly $4,600 in the wake of the first oil shock.
As you can see, there are plenty of arguments for both long and short trades. We hope that you position yourself correctly in this mixed situation – Bernstein Bank wishes you successful trades and investments!

Important Notes on This Publication:

The content of this publication is for general information purposes only. In this context, it is neither an individual investment recommendation or advice nor an offer to purchase or sell securities or other financial products. The content in question and all the information contained therein do not in any way replace individual investor- or investment-oriented advice. No reliable forecast or indication for the future is possible with respect to any presentation or information on the present or past performance of the relevant underlying assets. All information and data presented in this publication are based on reliable sources. However, Bernstein Bank does not guarantee that the information and data contained in this publication is up-to-date, correct and complete. Securities traded on the financial markets are subject to price fluctuations. A contract for difference (CFD) is also a financial instrument with leverage effect. Against this backdrop, CFD trading involves a high risk up to the point of total loss and may not be suitable for all investors. Therefore, make sure that you have fully understood all the correlating risks. If necessary, ask for independent advice. CFDs are complex instruments and are associated with the high risk of losing money quickly because of the leverage effect. 68% of retail investor accounts lose money trading CFD with this provider. You should consider whether you understand how CFD work and whether you can afford to take the high risk of losing your money.7

29.06.2022 – Turmoil in the oil market: Unrest in some smaller producing countries. Discussions about the exclusion of Russia from OPEC+. And most importantly, major producers Saudi Arabia and the United Arab Emirates appear to be at their maximum production capacity.

The bullish factors currently prevail in the oil market, as you will read below in a moment. Oilprice.com even sees a possible “doomsday” scenario for the market in the short term. In any case, the West Texas Intermediate (WTI) grade is groping its way up nicely along the 50-day trend.

Source: Bernstein Bank GmbH

Initially, Libya caused headaches for the bulls. The shattered country had initially recently announced that oil production was recovering. However, the state-owned National Oil Corporation (NOC) just warned of a possible force majeure that could release the company from fulfilling affected contractual obligations. In addition, unrest is raging in Ecuador – half of its production has already been lost, and soon it could be all of it. Libya and Ecuador together produce about 2 million barrels a day. In addition, exporters like Iraq are notoriously unstable.

At the limit
However, the news from Saudi Arabia and the Emirates is particularly problematic. Until now, both producers were considered important gap fillers to compensate for Russian oil in the wake of the Ukraine invasion. Russia’s shortfall is estimated to take 4.4 million barrels per day off the world market. The Emiratis officially said they are very close to their quota of about 3.2 million barrels per day allowed by OPEC. Moreover, they said, there are hardly any reserves in the short term. Saudi Arabia, meanwhile, said it can still produce up to an additional 2 million barrels per day in the short term.

Bad news
However, Oilprice.com reported that French President Emmanuel Macron told U.S. President Joe Biden at the G7 summit that the Saudis could only throw 150,000 barrels of reserve onto the market and that the Emirates was already at its limit. This, he said, was what the Emirates’ president, Mohammed bin Zayed, told him. Analyst Tobin Gorey of Commonwealth Bank confirmed this, pointing out that the UAE and Saudi Arabia were indeed producing at the end of their capacity.
Our conclusion: there is currently little argument for a reset in the oil market. Production is not likely to be ramped up significantly. Meanwhile, shale production in the U.S. is frozen for political reasons, eco and all. At the same time, the economy is ramping up again after the Corona shock, and tourism is picking up rapidly as people rush to take vacations before our gifted rulers impose another lockdown. Whether consumers are saving enough to cause a collapse in demand is doubtful. At best, a recession could ensure that. Goldman Sachs, by the way, raised its price target for Q3 22 from $119 to $139 per barrel of WTI earlier this month.
However, there could be surprises from the current OPEC meetings – today is the 184th Meeting of the OPEC Conference, tomorrow the 30th OPEC and non-OPEC Ministerial Meeting. Therefore, keep an eye on the real-time news. Bernstein Bank wishes you successful trades and investments!

Important Notes on This Publication:

The content of this publication is for general information purposes only. In this context, it is neither an individual investment recommendation or advice nor an offer to purchase or sell securities or other financial products. The content in question and all the information contained therein do not in any way replace individual investor- or investment-oriented advice. No reliable forecast or indication for the future is possible with respect to any presentation or information on the present or past performance of the relevant underlying assets. All information and data presented in this publication are based on reliable sources. However, Bernstein Bank does not guarantee that the information and data contained in this publication is up-to-date, correct and complete. Securities traded on the financial markets are subject to price fluctuations. A contract for difference (CFD) is also a financial instrument with leverage effect. Against this backdrop, CFD trading involves a high risk up to the point of total loss and may not be suitable for all investors. Therefore, make sure that you have fully understood all the correlating risks. If necessary, ask for independent advice. CFDs are complex instruments and are associated with the high risk of losing money quickly because of the leverage effect. 68% of retail investor accounts lose money trading CFD with this provider. You should consider whether you understand how CFD work and whether you can afford to take the high risk of losing your money.7

28.06.2022 – Legendary investor Michael Burry just sounded the alarm with a meager tweet that packs a punch: The founder of hedge fund Scion Asset Management warned of the so-called “bullwhip effect” in the retail sector. Soon, he said, there will be a supply glut, which in turn will lead to falling consumer prices later in the year. Eventually, he said, the Federal Reserve will reverse the interest rate hike it just started and end quantitative tightening.

Falling prices – deflation and economic crash. Stock market and commodity market collapse. If you follow this view, you should take a closer look at copper from the short side. Because the red metal can be found almost everywhere and is therefore a fabulous early economic indicator at the beginning of the production chain. Copper is used in electrical engineering, construction, medicine, mechanical engineering, arts and crafts, utilities and communications for furniture and musical instruments. And, by the way, also in the brass of cartridge cases, which are in high demand right now. In the spring, copper was trading at an all-time high of over $10,000 per ton, since then it has gone downhill to well below the 50-day line.

Source: Bernstein Bank GmbH

And so to the finer points: The Bullwhip Effect – also known as the Whiplash Effect – means that at the beginning of the whip, there is only a small ripple at the fist of the whip holder as it swings. However, this expands with each lunge – and at the end of the whip, the oscillations are enormous until the crack at the tip.

Misinterpretation of demand
Applied to retail, this means, roughly speaking, that small fluctuations in demand build up over the course of the supply chain – and that the economy is currently assuming that demand is far too large because of inflation in supply chain management. And that it is ramping up production too much. This is reinforced by the effect that retailers rely on large purchase volumes to extract discounts from manufacturers. If a customer also suspects rising prices, he will build up stocks that have little to do with the demand situation. And at some point, oversupply will follow. Ergo, in the worst case, bankruptcy of supermarkets, insolvency of manufacturers, bursting loans, tottering banks, unemployment, recession.

The Big Short II
Michael Burry is not just anyone: Before 2008, he and a handful of like-minded people bet on the bursting of huge amounts of bad financial derivatives backed by worthless mortgages – and on the overturning of investment banks that had bought these assets. Burry was right. Because he had research done on who had actually taken out all those oh-so-safe mortgages – strippers, for example, or homeowners who rented to the unemployed. In the Lehman crash, Burry became a billionaire. The saga was adapted into a book and a film under the title “The Big Short.

Price crash ahead?
We are curious to see if history repeats itself. In recent weeks, the financial blog “ZeroHedge” has also repeatedly warned of a “deflationary tsunami,” a wave of discounting and collapsing prices. Inflation, he said, is not a good indicator because it remains high, primarily because of food and energy. Our conclusion: whether you invest in the stock market or commodities, you should keep this warning in mind. Bernstein Bank wishes you good luck!

Important Notes on This Publication:

The content of this publication is for general information purposes only. In this context, it is neither an individual investment recommendation or advice nor an offer to purchase or sell securities or other financial products. The content in question and all the information contained therein do not in any way replace individual investor- or investment-oriented advice. No reliable forecast or indication for the future is possible with respect to any presentation or information on the present or past performance of the relevant underlying assets. All information and data presented in this publication are based on reliable sources. However, Bernstein Bank does not guarantee that the information and data contained in this publication is up-to-date, correct and complete. Securities traded on the financial markets are subject to price fluctuations. A contract for difference (CFD) is also a financial instrument with leverage effect. Against this backdrop, CFD trading involves a high risk up to the point of total loss and may not be suitable for all investors. Therefore, make sure that you have fully understood all the correlating risks. If necessary, ask for independent advice. CFDs are complex instruments and are associated with the high risk of losing money quickly because of the leverage effect. 68% of retail investor accounts lose money trading CFD with this provider. You should consider whether you understand how CFD work and whether you can afford to take the high risk of losing your money.7

24.06.2022 – Away from the din of Wall Street, a major event is underway in the agricultural market. The price of cotton is plummeting. The slump in consumption in the wake of rising global inflation is hitting cotton farmers and mills hard. The looming recession is outweighing the threat of supply shortages from poor harvests.

As it stands, the bull market that has been underway since the spring of 2020 has just been broken. In the Corona crisis, a pound of cotton was going for around 51 cents in March 2020 – this spring we had reached just over 155. In the meantime, we are below 100. However, the bears have to worry about the price gaps that have been torn in the meantime, which you can see in the daily chart. These gaps, opened in the rapid sell-off, will be closed at some point – only when?

The deflationary Corona crisis had initially caused prices to crash. Then all the global aid programs kicked in and demand rose. Now the cycle has apparently been turned again: Inflation is raging, a new recession is looming worldwide, the Federal Reserve is raising interest rates, and Europe will follow. Anyone who is afraid of losing their job and whose household budget is being eaten up by inflation, or who has financed their house with a flexible mortgage and has to shoulder rising interest rates, will save – and buy less clothing, home textiles or furniture.

Impending recession and buyers’ strike
The fate of cotton prices is in the hands of consumers, according to analyst Jeff Thompson of the Autauga Quality Cotton Association, a U.S. marketing association. He judged that the destruction of demand will probably outweigh the losses in production, more on this below. He added that consumption would be hit by rising prices, higher interest rates and the crash in asset values. As a result, he said, consumer sentiment in the U.S. currently stands at 50.2 points, down from 58.4 points the month before – and 85.5 a year ago. Already, he sees a slight oversupply, with the global mill processing rate estimated at 121.5 million bales. However, 121.7 million bales are coming from the fields. And, “It is easy to surmise a significant decline in mill use is very probable given the ominous shadow world economies are casting around the globe.”

Sanctions against China
However, there are certainly bullish arguments for cotton. For example, the Uyghur Forced Labor Prevention Act (UFLPA) went into effect in the U.S. earlier this week, as reported by the Guardian. This law bans the import of cotton from the Xinjang region in northwest China because of the oppression of the Uyghurs. About one-fifth of the cotton on the world market comes from the Middle Kingdom – and 84 percent of it again comes from Xinjiang. Presumably, the goods are purchased somewhere else. However, America is the price-determining market, and here U.S. farmers now have no Chinese competition.

Drought threat
The U.S. lobby group Cotton Incorporated also referred to the drought in the U.S. and other countries: “Too, both China and India are facing a combination of heat and some drought problems. Further, the worlds five largest cotton producing countries are all facing some level of uncertainty about a drought/heat reduced cotton crop.” We add: It is certainly not entirely altruistic for a producer association to see production losses and, as a consequence, rising prices. Nevertheless, it can be right.
Our conclusion: the determining factor for the cotton price is the threat of recession. It is no wonder that the crash in the cotton price coincides with the turnaround in interest rates and the Federal Reserve’s admission that a soft landing – that is, a return to normalcy without a crisis – would be a major challenge. However, massive crop failures could swing the pendulum back. The same goes for a change in sentiment in the global financial market – already some analysts are hoping for an end to interest rate hikes and even for a new quantitative easing, i.e. a renewed flood of money. So you should keep an eye on the real-time news. Bernstein Bank wishes you successful trades and investments!

Important Notes on This Publication:

The content of this publication is for general information purposes only. In this context, it is neither an individual investment recommendation or advice nor an offer to purchase or sell securities or other financial products. The content in question and all the information contained therein do not in any way replace individual investor- or investment-oriented advice. No reliable forecast or indication for the future is possible with respect to any presentation or information on the present or past performance of the relevant underlying assets. All information and data presented in this publication are based on reliable sources. However, Bernstein Bank does not guarantee that the information and data contained in this publication is up-to-date, correct and complete. Securities traded on the financial markets are subject to price fluctuations. A contract for difference (CFD) is also a financial instrument with leverage effect. Against this backdrop, CFD trading involves a high risk up to the point of total loss and may not be suitable for all investors. Therefore, make sure that you have fully understood all the correlating risks. If necessary, ask for independent advice. CFDs are complex instruments and are associated with the high risk of losing money quickly because of the leverage effect. 68% of retail investor accounts lose money trading CFD with this provider. You should consider whether you understand how CFD work and whether you can afford to take the high risk of losing your money.7

23.06.2022 – Now it’s getting exciting for the German stock market: An impending recession in the USA and the Ukraine war as well as a probable economic crisis in Europe are weighing on prices. The DAX is testing an important support zone.

On Tuesday, the DAX briefly dropped below 13,000 points to its lowest level since March. Yesterday, the German benchmark index had slipped to a three-month low. Société Générale commented that the index is currently sounding out the critical short-term support zone, which extends to 12,971 points. A daily close below this would confirm the overriding downward trend and make a timely reunion with the course low from March at 12,439 points likely. Most recently, the market tested this very zone.

Source: Bernstein Bank GmbH

This had happened: On the one hand, Jerome Powell caused nervousness yesterday with his speech before the Banking Committee of the U.S. Senate. He conceded that a recession as a result of higher interest rates was “certainly a possibility.” A so-called “soft landing” – that is, a resolution of the crisis without major damage – would be a challenge, he said.

Clueless on inflation
Then Powell caused raised eyebrows by acknowledging his own miscalculation: “Inflation has obviously surprised to the upside over the past year, and further surprises could be in store.” Powell thus confirmed his critics, who accuse him of saying that the Fed has acted too weakly too late. So we could still be in for a few more rate hikes as a pent-up demand. In addition, he explained that the Fed is powerless, for example, when oil prices rise. But wait a minute: Higher interest rates as poison for the stock market – and still no all-clear for inflation because of the dents in the supply chain? Stagflation!

Onward in Ukraine
Especially since the topics Corona and above all by Ukraine war remain for the stock exchange. Both events block the supply chains enormously and provide therefore for rising prices. While with Corona hope for improvement is announced, it looks different in the Ukraine. Russia just has to continue as before: block grain deliveries, throttle gas, bomb Ukraine. There are plenty of petrodollars from the West, and in the course of the grandiose German energy turnaround, with modern German nuclear power plants standing around uselessly switched off, it will take a few months to replace Russian oil and gas.

Appeasement in the West
Meanwhile, weapons from the West for Ukraine are only available in medical doses, because we don’t want to anger Vladimir Putin. The louder and more pseudo-decisively the heads of state and government of Germany, France or Italy act, the less heavy equipment Ukraine will receive. The current decision-makers in the Chancellery and the Ministry of Defense are a big gift for the Kremlin. Ergo, the pressure on the German economy and on the stock market will not let up from this side. Whether long or short – Bernstein Bank wishes you good luck with your trades and investments!

Important Notes on This Publication:

The content of this publication is for general information purposes only. In this context, it is neither an individual investment recommendation or advice nor an offer to purchase or sell securities or other financial products. The content in question and all the information contained therein do not in any way replace individual investor- or investment-oriented advice. No reliable forecast or indication for the future is possible with respect to any presentation or information on the present or past performance of the relevant underlying assets. All information and data presented in this publication are based on reliable sources. However, Bernstein Bank does not guarantee that the information and data contained in this publication is up-to-date, correct and complete. Securities traded on the financial markets are subject to price fluctuations. A contract for difference (CFD) is also a financial instrument with leverage effect. Against this backdrop, CFD trading involves a high risk up to the point of total loss and may not be suitable for all investors. Therefore, make sure that you have fully understood all the correlating risks. If necessary, ask for independent advice. CFDs are complex instruments and are associated with the high risk of losing money quickly because of the leverage effect. 68% of retail investor accounts lose money trading CFD with this provider. You should consider whether you understand how CFD work and whether you can afford to take the high risk of losing your money.7

22.06.2022 – The bulls breathed a short sigh of relief: Recently, prices on Wall Street started to rise again. Just a bear market rally? Or a turnaround after all? For traders, it doesn’t matter. For investors, however, it does. For both, the arguments for and against the turnaround are interesting. We take a look behind the scenes.

Investors are already taking cover again. Yet the 50-day line in the S&P 500 continues to beckon. At some point, a return here should occur. So the bulls continue to lurk for the rebound. By the way, the previous week’s loss in the SPX was the highest since March 2020. If everyone has sold – who should still press the sell button?

Goldman Sachs, by the way, provided an explanation for last week’s sell-off. According to the Prime Brokerage department, hedge funds were selling off assets in a big way. And in a really big way: never before had so many dollars been turned over, the volume was higher than in the Lehman crash of 2008. Whereby it should be noted that Goldman’s data only goes back to April 2008. We think: This actually sets the stage for a strong countermovement.

Buying at the end of the month

So where do we go from here? JPMorgan’s strategy department now sees the possibility of a broader rally. Among other things, because of purchases at the end of the month, which could flush more than 100 billion dollars into the stock markets worldwide. We add: We also have quarter-end, which is when mutual funds deliver their reports. Fund managers would have some explaining to do if cash ratios are high. Ergo, they could get in now, especially after the setback.

Impending recession

And now the dissenting voice: Michael Wilson, chief investment officer at Morgan Stanley, sees the market as more fairly priced with the recent sell-off. However, the risk of a recession is still not priced in. And that means the S&P 500 could still very well dip as low as 3,000. In other words, the bear market will not be over until either the recession has arrived or the risk of an economic crisis is involved.
We hope that you make the right decisions in this mixed situation – Bernstein Bank stays on the ball for you!

Important Notes on This Publication:

The content of this publication is for general information purposes only. In this context, it is neither an individual investment recommendation or advice nor an offer to purchase or sell securities or other financial products. The content in question and all the information contained therein do not in any way replace individual investor- or investment-oriented advice. No reliable forecast or indication for the future is possible with respect to any presentation or information on the present or past performance of the relevant underlying assets. All information and data presented in this publication are based on reliable sources. However, Bernstein Bank does not guarantee that the information and data contained in this publication is up-to-date, correct and complete. Securities traded on the financial markets are subject to price fluctuations. A contract for difference (CFD) is also a financial instrument with leverage effect. Against this backdrop, CFD trading involves a high risk up to the point of total loss and may not be suitable for all investors. Therefore, make sure that you have fully understood all the correlating risks. If necessary, ask for independent advice. CFDs are complex instruments and are associated with the high risk of losing money quickly because of the leverage effect. 68% of retail investor accounts lose money trading CFD with this provider. You should consider whether you understand how CFD work and whether you can afford to take the high risk of losing your money.7

20.06.2022 – … it still hurts. And there is always a first time. Even with Bitcoin: for the first time ever in its young, twelve-year history, BTC could break the interim high from the earlier bull cycle at the end of 2017. A sustained puncture of the support could have a signal effect on the chart technique and the further course of events.

“ZeroHedge” puts the interim high at 19,511, we find other data with a high of 19,650 or even 19,345. Whatever the case, that is exactly where BTC is now. Of all times, we are now experiencing a true crypto cascade. What a painful development for the bulls since the all-time high of 67,734 in November. However, the situation is more than oversold – now two gaps are waiting to be closed.

Source: Bernstein Bank GmbH

Here’s what happened: According to data from the trading platform Coinglass, total liquidations in the crypto market were €435 million at the start of the week. The selloff began about a month ago when the cyber currency Luna, used as collateral for the stablecoin Terra, wiped out about $60 billion in market cap. This weekend, a veritable bank run began in the crypto-world: On Sunday, trading platform Celsius Network banned account withdrawals. Babel Finance from Hong Kong also gladly froze customers’ accounts. All this reminds us very much of the Lehman crash in 2008.

Cryptic on the brink
And already last Wednesday, Three Arrows Capital sent out a cryptic and therefore alarming tweet. Specifically: “We are in the process of communicating with relevant parties and fully committed to working this out,” wrote one of the co-founders, without explaining what “this” is exactly. Now we know more: According to the Wall Street Journal, the Dubai-based crypto hedge fund Three Arrows is trying to buy time from creditors to work out a plan to save the company. This grandiose plan could involve the sale of assets or a possible bailout. Or the bankruptcy judge may be waiting, we briefly note. The fabulous financial blog ZeroHedge commented that, as with Bear Stearns some 14 years ago, the Three Arrows case shows that this is not just about one problematic company.

Inflation goes deflation
Possible reasons for the sell-off in cryptos: The current raging global inflation is a harbinger of the coming recession. To put it briefly, this is true: When everything becomes more expensive, people start saving. Consumption first stops in marginal economic sectors such as tourism or textiles, and then eats into the core such as building materials or real estate. Ergo: unemployment, insolvencies. Those who still have money to spare are saving, but spending less and less.

Eye on the new high
But in the midst of the sell-off, a dissenting voice was reliably heard: Wirtschaftswoche” wrote that a cleansing storm was important for the young asset class. Investors should remember the basic principles: “Not your keys, not your coins” – only those who keep their Bitcoin themselves can be sure of them. And further: “So far, bitcoin has risen to a new all-time high after every bear market.” We are curious and will stay on the ball for you on this exciting topic!

Important Notes on This Publication:

The content of this publication is for general information purposes only. In this context, it is neither an individual investment recommendation or advice nor an offer to purchase or sell securities or other financial products. The content in question and all the information contained therein do not in any way replace individual investor- or investment-oriented advice. No reliable forecast or indication for the future is possible with respect to any presentation or information on the present or past performance of the relevant underlying assets. All information and data presented in this publication are based on reliable sources. However, Bernstein Bank does not guarantee that the information and data contained in this publication is up-to-date, correct and complete. Securities traded on the financial markets are subject to price fluctuations. A contract for difference (CFD) is also a financial instrument with leverage effect. Against this backdrop, CFD trading involves a high risk up to the point of total loss and may not be suitable for all investors. Therefore, make sure that you have fully understood all the correlating risks. If necessary, ask for independent advice. CFDs are complex instruments and are associated with the high risk of losing money quickly because of the leverage effect. 68% of retail investor accounts lose money trading CFD with this provider. You should consider whether you understand how CFD work and whether you can afford to take the high risk of losing your money.7

17.06.2022 – A lot is happening at the moment: Great Britain and Switzerland have now also raised interest rates. Japan continues to refuse. The result: the yen is plunging. Equities, too, are sliding, because higher interest rates not only fight inflation, but also suck capital out of the financial market. Currencies with high interest rates, on the other hand, are robust.

We can hardly keep up with the news at the moment. And it is difficult to pick out the most interesting chart in these turbulent times. We have chosen the four-hour chart of CHFJPY – where a nice upward channel has built up. We see no fundamental reason why this should change apart from profit taking, intervention or a radical but unlikely reversal in Tokyo.

Source: Bernstein Bank Gmbh

What has happened: Today, Friday, the Japanese central bank again refused to support the Japanese yen. The short-term key interest rate remains at minus 0.1 per cent, the purchase programme of government bonds and other securities will not change. The Bank of Japan is sticking to its interest rate target of 0.25 per cent for ten-year Japanese bonds. As a result, this weakens the yen. In other words, the BoJ continues to diligently buy its own government bonds to keep the yield at this mark, of course with printed yen.

Interest rate hike in the UK
The evening before, Wall Street and the European stock markets had fallen sharply. For the interest rate turnaround is widening. After the Federal Reserve, the Bank of England raised its key interest rate by a quarter of a percentage point to 1.25 per cent. There is probably more to come: Because the monetary guardians predicted inflation of more than 11 per cent for the island in October this year.
Switzerland raises key interest rate

The Swiss National Bank (SNB) also raised interest rates for the first time in over seven years. The key interest rate and the interest rate on demand deposits will be raised by half a percentage point from minus 0.75 per cent to minus 0.25 per cent as of 17 June. A move that has already given stock market players everywhere a bit of a fright. Especially since many investors are wondering how many US shares the SNB really holds – and whether it will liquidate them at some point. At the end of March, Switzerland held a new record value of 177.3 billion dollars, as the Securities and Exchange Commission (SEC) announced in its quarterly report.

Franc long – Yen short
The conclusion to be drawn from this constellation: the ring leader on the long side is the Swiss franc. The Alpine republic exports goods and services that are quite crisis-proof for years to come. Such as: Banking services with banking secrecy; high-priced tourism that attracts sheikhs, US movie stars, Russian oligarchs or the Indian middle class with snow-sure luxury; premium watches; pharmaceuticals. You can also see the strength of the economy from the fact that inflation in Switzerland is still quite moderate at 2.9 per cent in May.
On the short side, the Japanese yen remains the frontrunner. The Nippon, with its exports of household electronics, high-tech and cars, will feel the consequences of a global recession keenly. And the Japanese central bank remains stuck in the interest rate trap. That is exactly why we have put the franc and the yen together in one chart above.
It smells of intervention
And a final statement: If the interest rate crash picks up speed and panic rages at some point, it is only a matter of time before the Federal Reserve intervenes in tandem with the major central banks. Buying bonds or stocks would be ways to stop the crash. Bernstein Bank keeps you up to date!

Important Notes on This Publication:

The content of this publication is for general information purposes only. In this context, it is neither an individual investment recommendation or advice nor an offer to purchase or sell securities or other financial products. The content in question and all the information contained therein do not in any way replace individual investor- or investment-oriented advice. No reliable forecast or indication for the future is possible with respect to any presentation or information on the present or past performance of the relevant underlying assets. All information and data presented in this publication are based on reliable sources. However, Bernstein Bank does not guarantee that the information and data contained in this publication is up-to-date, correct and complete. Securities traded on the financial markets are subject to price fluctuations. A contract for difference (CFD) is also a financial instrument with leverage effect. Against this backdrop, CFD trading involves a high risk up to the point of total loss and may not be suitable for all investors. Therefore, make sure that you have fully understood all the correlating risks. If necessary, ask for independent advice. CFDs are complex instruments and are associated with the high risk of losing money quickly because of the leverage effect. 68% of retail investor accounts lose money trading CFD with this provider. You should consider whether you understand how CFD work and whether you can afford to take the high risk of losing your money.7

16.06.2022 – After the biggest rate hike since 1994, the Federal Reserve has unleashed a small short squeeze. But the question is, raising rates by 75 basis points is enough to contain inflation. For some investors, the Fed would have to raise the fed funds rate to 20 percent. For others, the Fed is simply powerless against the inflation monster of its own making.

The Fed pretends to be determined, but its actions are powerless. The key interest rate in the U.S. is now 1.75 percent – which is quite measly in view of inflation of 8.6 percent. Nevertheless, prices on Wall Street rose again yesterday. At 3,730, there are signs of a minimal bottom. It is quite possible that the S&P 500 – shown here in the daily chart – will make a run to the 50-day line. The trading desk at Goldman Sachs judged that by the end of the month and quarter, some $30 billion in built-up cash should flow into the stock market. But then it will head back down, it said.

Source: Bernstein Bank GmbH

Some investors warned that the Fed needs to be much more decisive. Bert Dohmen, owner of Dohmen Capital Research Group, used March 1980 as a model, when the federal funds rate was set at 20 percent. At that time, he said, inflation was at a record 14.8 percent.

Monster out of control
Others see the situation as completely hopeless. Fund manager, mega-pessimist and gold bug Peter Schiff criticized already one month ago, the Fed only pretends to fight the inflation. Because it is actually powerless, Schiff judged in an interview with the blog USWatchdog.com. De facto, he said, the Fed had created a creature with years of money glut and zero interest rates that it could no longer control. The president of Euro Pacific Capital said, “As the Fed was on this course of deliberately creating inflation, I always said this was going to come back and bite the Fed because they were going to let loose a monster that they were not going to be able to fight, like Frankenstein.”

Greater Depression
In fact, the Fed could no longer normalize interest rates to the extent that this would suck money out of the market – that would lead to a mega-crash. Schiff said: “We would have a financial crisis that would make 2008 look like a Sunday school picnic, and there will be no bailout if the Fed is fighting inflation. It wouldn’t be another ‘Great Recession,’ it would be a ‘Greater Depression.’ This is why the Fed can’t do anything. The Fed can’t do what Paul Volker did . . . and raise interest rates to 20%.”

The end is near
And therefore, he said, things would run their course because of the inability to curb inflation: The economy would shut itself down – like Covid only without Covid. Collapse in the U.S. job market. Dollar crash and gold bull market. Away from the financial market, he advised investors to hoard everything useful for daily life: toiletries, food, spare parts – everything. We are curious to see whether the monster scenario comes true – and wish all readers successful trades and investments!

Important Notes on This Publication:

The content of this publication is for general information purposes only. In this context, it is neither an individual investment recommendation or advice nor an offer to purchase or sell securities or other financial products. The content in question and all the information contained therein do not in any way replace individual investor- or investment-oriented advice. No reliable forecast or indication for the future is possible with respect to any presentation or information on the present or past performance of the relevant underlying assets. All information and data presented in this publication are based on reliable sources. However, Bernstein Bank does not guarantee that the information and data contained in this publication is up-to-date, correct and complete. Securities traded on the financial markets are subject to price fluctuations. A contract for difference (CFD) is also a financial instrument with leverage effect. Against this backdrop, CFD trading involves a high risk up to the point of total loss and may not be suitable for all investors. Therefore, make sure that you have fully understood all the correlating risks. If necessary, ask for independent advice. CFDs are complex instruments and are associated with the high risk of losing money quickly because of the leverage effect. 68% of retail investor accounts lose money trading CFD with this provider. You should consider whether you understand how CFD work and whether you can afford to take the high risk of losing your money.7