News

13.06.2022 – Sell-off on the stock market – the U.S. Consumer Price Index (CPI) has risen more than feared. Investors realize that ketchup inflation is here: first nothing, then everything at once. And they realize they can’t rely on the expertise of decision-makers. As always, at some point price increases will choke off the economy as people start saving and cutting back on consumption. The same goes for a drastic increase in interest rates.

Glorious days for the bears: Wall Street has dived sharply, in the picture below the daily chart of the S&P 500. Actually, this looks like a violently oversold situation for now, so a countermovement should be in the offing soon. The first target would be initially the return to the 50-day line, with new euphoria finally to the 200-day line above. Only: What should trigger this new confidence? When will it happen? U.S. futures on Monday initially indicated that the slide would continue

Source: Bernstein Bank GmbH

What had happened: CPI, reported Friday, rose 0.97 percentage points month-over-month in May – most analysts had expected plus 0.7 percent. Food rose 1.2 percent month-over-month; gasoline, 3.9 percent – and 75 percent annualized. The inflation rate in the USA now stands at 8.6 percent, the highest level in 41 years.

Cluelessly into the crisis
Also of little help to the bulls is the fact that U.S. Treasury Secretary, Janet Yellen recently admitted mistakes. “I think I was wrong about the inflation trajectory,” said Yellen, who had been president of the U.S. Federal Reserve from 2014 to 2018. Which raises the suspicions of all those who believe the Federal Reserve has done too little too late.

How will the Fed respond?
Barclays Bank now expects the Fed to finally take drastic action. Analyst Jonathan Millar just pushed, “We expect a 75bp hike at the June meeting.” Until now, the market has assumed 50bp. So far, the Fed has always avoided surprising the financial market, Barclays explained. In the near future, however, that could change. Financial blog ZeroHedge commented, “the market is now pricing in 10 more rate-hikes by the end of 2022 and then 3 rate-cuts following it.”
Higher interest rates are a horror to bullish stockbrokers because they make it harder for businesses to borrow and because it slows down the economy – expensive consumer credit, mortgage interest rates rise, more saving. But the same applies to inflation. Ergo: falling corporate profits, correction of stock valuations, cutbacks in consumption. In the end: recession.

Impending recession
Star investor Stanley Druckenmiller also warned of an economic slump in the coming year. The founder of Duquesne Family Office predicted a prolonged bear market shortly before the latest inflation figures at the 2022 Sohn Investment Conference. He expects an eruption in inflation this summer. Druckenmiller judged that already inflation is far higher than expected – and the most shocking fact is the Fed’s slow response to it. After all, he said, the bubble in the S&P500 has burst and valuations are now more attractive again. But, “It’s highly probable that the bear market has a way to run.” Bernstein Bank keeps an eye on the situation for you – and wishes 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

09.06.2022 – As expected, the situation with the Japanese yen has deteriorated dramatically. The currency is stuck in a downward spiral that is difficult to stop. We shed light on the background.

The dollar has just risen to 134.55 to the yen – the highest level since 2002. Former Japanese Finance Minister Eisuke Sakakibara – also known as Mr. Yen – has already brought the 150 yen per dollar mark into play. The high from 1998, by the way, is 147.66. But there’s more: the peak from 1982 is even around 280. When USDJPY – here the weekly chart – will return to the 50 line is written in the stars. Perhaps in an intervention, when Japan sells dollars.

Source: Bernstein Bank GmbH

This is what happened: Traders and investors are watching with concern as Bank of Japan (BOJ) Governor Haruhiko Kuroda spouts nothing but bubbles despite the current situation. In front of parliament in Tokyo on Wednesday, he talked up the yen’s weakness and fabricated that it was good for the economy. After all, he added, a stronger crash of the foreign currency is not desirable.

The ultimate dilemma

Which makes it clear to the financial blog Zero-Hedge that the BOJ is in a bind. The central bank can either keep the interest rate on ten-year Japan Government Bonds stable at 0.25 percent. That is its stated goal. Or it can support the yen. Both together are not possible, he said. The fact that the central bank decided in favor of the interest rate target is hardly surprising in view of the enormous indebtedness of the Nippon.

Lone Loser

A forex expert also sees it that way: Kuroda’s statements accelerated the sell-off of the yen, judged Jun Kato, Chief Market Analyst at Shinkin Asset in Tokyo. He added: “The picture of the yen being left out as a lone loser came to the fore as markets actively priced in an ECB rate hike while the Australian dollar remains on an uptrend with its clear tightening stance.”

Commodity Cross Trade

And that has already given traders an interesting clue: If Japan is the only major economy to keep interest rates low while the U.S., and soon the European Central Bank, raise rates, then short opportunities open up here. This is even more true for the yen against currencies of countries with strong commodity earnings. These include, in addition to the U.S. (gold, silver, oil, gas, coal, copper), Australia (ore, gold, lead, zinc, nickel) or Canada (gold, oil, uranium, nickel, potash salt). Commodity currencies are likely to be the winners against other countries without commodities in the current inflation – when commodity prices rise, the treasury fills up and these countries can more easily reduce their own debt. We look forward to seeing what happens next – Bernstein Bank is keeping an eye on the issue 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

07.06.2022 – It’s getting tight for Twitter: The social media company has been targeted by a US prosecutor. Within three weeks, Twitter must provide reliable data on fake accounts and bots. This looks very much like do or die for the stock.

The drama surrounding Twitter has left its mark on the share price. The share price first rose in the hope of a takeover battle. In the course of the tug-of-war over possibly falsified user figures, it went downhill. The share price is now lurking below the 50-day line on the daily chart.

Source: Bernstein Bank GmbH

Now it’s down to the wire for Twitter: Attorney General Ken Paxton from Texas announced yesterday that he had initiated an investigation against the company. The investigation involves a possible lie about the number of fake bot accounts on the social media site. According to Paxton’s press release, bots or spam accounts distort the true user numbers. Literally, “they inflate followers and reach, and often push deceptive and annoying activity.”

5 percent or 20 percent fakes?

Paxton doubts Twitter’s claim that there are only less than 5 percent of spam accounts and sees potentially a 20 percent share. That, of course, calls into question the marketing potential via advertising. Hence the current Civil Investigative Demand (CID). Twitter must now deliver resilient figures within three weeks.
Because of the recent squabbles, the planned takeover of Twitter could fall through: Tesla billionaire Elon Musk has been complaining for weeks about Twitter’s allegedly false estimates of the number of spam and fake accounts. Twitter refuses to provide him with reliable data for his own research on the number of spam and fake accounts. This is a violation of the takeover agreement, he said. This is precisely why Musk reserves the right to back out of the deal, he said. That’s also why Musk declared the deal suspended – he had offered Twitter shareholders $54.20 per share.

Twitter must deliver

The next three weeks will determine whether the takeover goes through – albeit perhaps at a lower price. Or Twitter presents reliable figures that show that everything is proceeding correctly and that the fake figures are actually low – then the share price should go up. The question for us is why there are not 0 percent fake users on Twitter – after all, people who tweet expect to communicate with real people. Or it comes out that Twitter lied about the numbers of real accounts. Which is also likely to bring the U.S. Securities and Exchange Commission into the picture. And it would almost certainly result in a flood of lawsuits and mass sell recommendations from analysts.
So it’s quite possible that Musk will pull out of the deal and leave Twitter completely destroyed. A bombed-out Twitter stock will then become interesting for the bulls again once the management has been replaced and the internal fake accounts have been eliminated. And perhaps when freedom of expression for conservatives also prevails at some point. Our conclusion: The current development initially argues for a sideways movement until the matter is clarified. Bernstein Bank is keeping an eye on the matter 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

02.06.2022 – That’s real power: a single manager sinks the market. But is the warning from Jamie Dimon, head of JPMorgan, enough to put a lasting halt to the recent rally? Only if he’s right. The investment banker sees the Federal Reserve tightening and the Ukraine war as threats to the market. He was joined by two other influential cautioners.

It can happen that quickly: Wall Street has interrupted its recent countermovement and reset first. The Dow Jones stopped just below the 50-day line, above which the 200 average continues to beckon. So far, this is only a small setback in the daily chart. But perhaps this is a harbinger of more to come.

Source: Bernstein Bank GmbH

Warning of the hurricane

That’s what it was all about: Dimon warned that a hurricane was brewing in the economy. He literally said yesterday at a financial conference sponsored by AllianceBernstein in New York City: “I said there were storm clouds, big storm clouds. It’s a hurricane. (…) Right now it’s kind of sunny, things are doing fine, everyone thinks the Fed can handle it. That hurricane is right out there down the road coming our way. We don’t know if it’s a minor one or Superstorm Sandy. You better brace yourself.”

Fed and Ukraine war

In other words, we may be experiencing the calm before the storm. Lots of sunshine, beautiful weather – and soon it will crash. The head of JPMorgan blamed two events in particular for the possible coming catastrophe: First, the Federal Reserve’s plan to shrink its balance sheet – quantitative tightening will have consequences for the financial market. “We’ve never had QT like this, so you’re looking at something you could be writing history books on for 50 years,” CNBC reported. The background: the Fed will let $47.5 billion worth of bonds expire this month. That monthly rate will double to $95 billion in September.
The second storm factor, he said, is the war in Ukraine and the impact on commodity prices, especially oil and gasoline. The price of a barrel of oil could reach $150 or $175 a barrel, he said.

Wells Fargo and Atlanta Fed

They were joined by two other bearish speakers. Charlie Scharf, Group CEO of the major bank Wells Fargo, reiterated his assumption that higher interest rates are likely to slow down the economy – and that a soft landing would be difficult to achieve. Ergo: looming recession.
Further, Raphael Bostic, head of the Atlanta Fed, recaptured his recent statement that the Fed could pause on rate hikes in September. In an interview with “Marketwatch”, he stressed that his statement could not be interpreted as an announcement that the Fed will save the market. So as you can see, you need to keep a constant eye on the realtime 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

31.05.2022 – The oil market is reacting to the half-hearted sanctions imposed by the European Union. The EU has just agreed to an “oil embargo light”. The Kremlin continues to be happy about money from the West. Meanwhile, Ukrainian troops in the Donbas are bleeding to death. Germany, in particular, is letting Ukraine starve militarily with its long arm.

Movement on the oil market: Prices have just increased significantly, rising to their highest level in a good two months. In the four-hour chart of Brent, we see in the MACD below (12.26.9) that we are approaching short-term overbought territory.

Source: Bernstein Bank GmbH

What warns us to be cautious: The latest movement is initially based only on expectations of a coming shortage. This could all collapse very quickly as soon as the embargo does not take effect properly and immediately. It is also quite possible that the now planned curtailment will be delayed or even called off again.

Loopholes in the embargo

This is what has happened: The EU states have reached a compromise on the oil embargo against Russia. For the time being, however, only Russian oil deliveries via the sea route are to be prevented. Oil will continue to flow via the pipeline called “Druzhba” (Friendship). In addition to Hungary, the Czech Republic and Slovakia are also to receive crude oil. Germany and Poland have made it clear they do not want to participate in this exemption – they are also attached to the “Druzhba”. However, some media report that Poland and Germany will continue to receive oil from the pipeline until the end of the year. In total, one-third of Russia’s oil imports so far come through the “Druzhba,” while two-thirds are transported by sea. According to what we have read, sea imports are to be stopped immediately. We are skeptical here.
EU Commission President Ursula von der Leyen rejoiced: the compromise would “effectively (…) reduce 90 percent” of Russian imports by the end of the year. Conversely, this means that Russia will de facto continue to receive massive amounts of petro-billions from us for its war for another six months. Europe is currently transferring around 450 million euros a day to Russia. Moreover, natural gas is exempt from sanctions.

Hollow words

As with weapons, the slippery caste of politicians talks a lot and acts little. U.S. President Joe Biden made it clear Monday that he would not supply Ukraine with long-range missiles. Whereby Russia continues to blithely bomb the supply routes and Ukraine cannot respond. No wonder Vladimir Putin waited with his attack until Donald Trump was gone. Germany is acting particularly mendaciously: Berlin has so far delivered no Leopard, no Marder, no howitzers, no Gepard tanks. And that will probably never happen. Because a state secretary claimed that there was an “informal agreement” in NATO not to deliver heavy equipment. Of which the other countries know nothing.

Gift of the appeasers

For the Czech Republic and Poland have sent old Soviet tanks to the front, the U.S. and France howitzers, the British apparently infantry fighting vehicles. But no aircraft for ground combat, no jets, no modern tanks, no medium-range missiles, no air defense, no laser-guided artillery. The whole thing looks like a dirty deal: Russia gets weakened with the minimum of weapons, but is supposed to quietly conquer the predominantly Russian-speaking “people’s republics” of Donetsk and Luhansk, otherwise leaving the core state of Ukraine alone. It’s all very reminiscent of the 1938 Munich Agreement, isn’t it?

The consequences for oil and stocks

Whatever the case, if the oil embargo takes effect in the medium term, Russia is likely to feel the financial consequences and the price of oil will continue to rise. But it is more likely that oil will continue to be imported to Europe after the turn of the year, that Russia will annex the Donbas in the meantime, and that Ukraine will have to accept this for lack of heavy weapons. In this way, the appeasers in the West could lay a small victory at the Kremlin’s feet and turn everything back to the original state. After all, nobody wants to provoke a nuclear war and we all want cheap energy after all… Stupid for Ukraine, which has lost tens of thousands of people. For traders and investors, this Western-directed Ukrainian defeat would mean that in the medium term, oil prices would fall and stock prices would rise. 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

30.05.2022 – Has inflation peaked or not? And how will the Federal Reserve respond? These two questions in particular are important for the stock market. Two investment banks have dared to look into the crystal ball.

Relief for the bulls: Wall Street has recently made up considerable ground. For Citibank, this is mainly due to the inflow of pent-up capital before the end of the month – the institution registered in recent days the highest buying level since March 2020. Also, the latest minutes from the Federal Reserve turned out less hawkish than expected – and so the interest rate fears faded for now. Bear market rally or trend reversal? In any case, the Dow Jones in the daily chart is first trying to return from the oversold situation to the 50-day moving average. The next stop would then be the 200 line above it.

Quelle: Bernstein Bank GmbH

However, there may be other factors behind the recovery. In a roundabout analysis, for example, Goldman Sachs just pointed to the importance of peak inflation. The peak in inflation could herald a recovery for equities. The bank looked back to 1950 and discovered twelve peaks with inflation rates above 3 percent. Normally, the market runs upward after such a peak, it said. We think: The art is thus to recognize the high in the price increase.

Peak inflation

However, Goldman Sachs continued, investors need other support on the way up. For example, a strong economy: Interestingly, the peak is sometimes followed by a weak phase in the economy, as happened in the 1950s, 1960s and 1980s. An exception was 1974. Market valuation is also important. In 2001, for example, the stock market continued to fall after the high in inflation because prices were overvalued. After September 2011, it went up again – because the S&P 500 was only valued at eleven times. Also important, according to Goldman, are falling interest rates.

Strong economy – falling interest rates – low valuation

October 1990, he says, is a good example of all these factors coming together: the market rose 30 percent in the 12 months after peak inflation, according to the Goldmen. And then a warning: if inflation remains sticky high – we add: if there is a plateau rather than a real peak – it will be difficult for the stock market. The moral of the story: the bulls need low valuations (so preferably a real sell-off beforehand), a strong economy, a significant dip in inflation, and the end of the rate hike cycle.
Fittingly, JPMorgan attempted a forecast: indirectly, the bank predicted three more 50 basis point rate hikes and then a pause starting in September. We add: If a recession emerges then, rate cuts will be back on the table. We hope that the analyses will help you with your trades and investments – and wish 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

26.05.2022 – How the images resemble each other: The regime in Beijing is enforcing a rigorous zero-covid policy. Including lockdowns, traffic jams at the ports and disruption of the supply chains. Now just like at the beginning of the pandemic. With severe consequences for the economy and the stock market. We explain what this means for traders and investors.

China stocks have not been a source of joy for the bulls lately. Since the beginning of the year, China’s mainland index CSI 300 has slipped by about one fifth. For months, the Chinese leadership has been teaching the domestic oligarchs a lesson, putting more and more obstacles in their way. And then Corona, too. Pars pro toto, the share of the trading platform Alibaba shows the decline of all those shares that rely primarily on the domestic market. The famously bearish trend in the weekly chart speaks for itself.

Source: Bernstein Bank GmbH

The latest bad news from the Middle Kingdom: The number of illnesses in Beijing has risen and the nearby port city of Tianjin sealed off a district in the centre. In the past days and weeks, some bad economic data had arrived from China: The Corona variant Omicron is taking its toll on the Chinese economy.

Data of horror
Industrial production fell 2.9 per cent in April compared to a year earlier, the Beijing statistics bureau reported. Retail sales plunged by a staggering 11.1 per cent – exceeding most analysts’ forecasts. A particular problem for the communist party: unemployment in China is rising sharply – the unemployment rate was 6.1 percent in April. This figure is only just below the historical record of 6.2 per cent from February 2020 from the beginning of the Corona pandemic. A particular problem: youth unemployment is currently even higher than it was then. The CP lives in constant fear of an upheaval.
Moreover, there is the threat of a loss of face: the Chinese leadership had set a growth target of 5.5 percent for this year. The International Monetary Fund expects only 4.4 percent. In April, real estate sales were the weakest in 16 years – the real estate crisis is spreading. Beijing has therefore lowered interest rates on mortgage loans for first-time buyers.

Hopes for a turnaround
The hopes of the financial market are now pinned on an opening of the port of Shanghai. According to the government, the metropolis of millions should gradually return to normality by 1 June. In Beijing, however, the lockdown remains in place in some districts. To contain the spread, the government had imposed an extremely restrictive lockdown in Shanghai and other major cities since the end of March. Millions of people in Changchun or Jilin province have not been allowed to leave their homes for weeks. In the capital Beijing itself, many neighbourhoods are sealed off. Most shops and many companies are closed. Millions work in their home offices.

Waiting for the interest rate cut
And with all this misery, long-orientated investors are now hoping for a turnaround. Presumably, the Chinese central bank will cut interest rates in the course of the year to stimulate the economy. Unlike in the West, there are good fundamental reasons for this, as inflation is only 2.1 percent. We suspect that at some point the stock market will start to believe in the Chinese future again – and then the now beleaguered stocks will probably make a particularly strong recovery. Bernstein Bank is keeping an eye on the matter for you – we wish 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

23.05.2022 – It’s official: the stock market has entered a bear market. The broad Wall Street has corrected by 20 percent since the all-time high in January. Even Friday’s late recovery does little to change that. But the night is darkest just before sunrise. Already the first experts have spoken with hope signals for all bulls.

Those were hard days for all long-invested Trader and investors: The Dow Jones submitted according to the financial blog ZeroHedge full eight loss weeks in a row – the longest negative series since 1923! In the SPX the thing becomes even more drastic on short term: On 01 April the S&P 500 stood with 4,546, on Friday it went down up to 3,901 – a pretty loss of 14.2 per cent in only one and a half months. In addition, the index had broken through the “Maginot line” at 3,855 in the meantime and was at the level of March 2021. The SPX had thus joined the Russell 2000 and the Nasdaq (both nearly minus 30 percent). Only the energy sector bucked the trend, down about 5 percent. Super-techs like AAPL, AMZN, GOOG, NFLX, and TSLA saw the biggest losses.

Apple as trend barometer

It is interesting to note how stringent Apple’s recent move has been. First, after digesting the Ukraine shock, it consistently went up – all white candles in the daily chart from the first week of March. And in the correction since the end of March, the bear market was quite reliable.

Source: Bernstein Bank GmbH

JPMorgan sees rebalancing

And with that, we’ll let the bulls have their say. A statement from investment bank JP Morgan just made us sit up and take notice. On the one hand, analyst Nick Panigirtzoglou considered at least a short term bounce possible. The reason: by the end of May, JPM sees $34 billion to $56 billion in stock purchases on the horizon. The reason, he said, is rebalancing at large mutual funds. In other words, customer funds need to be invested, and with the lower prices for equities, there is too much cash to match.

And Norges Bank has also sounded the same horn: According to this, by the end of the quarter, around 40 additional billion dollars are likely to flow into shares from investment funds in the USA – and a further 136 billion dollars from pension funds. So there is an investment backlog that needs to be cleared.

US economy not quite so weak

In addition to the quants, trader Andrew Tyler, also from JPMorgan, also expressed a bullish opinion. According to him, the US economy is doing better than many believed – there is a divergence between the economy and the financial markets. It will take a while before the two are in harmony. Further downward pressure is to be expected, but equities and commodity-related assets are the best investments for any time horizon. In addition, tech will move the market down or up, he said; these stocks are challenging, but offer trading opportunities for short-term traders.
Translation: in the meantime, sentiment is worse than the situation, which means the downtrend is overdone. Which should eventually show up in corporate earnings. We are curious – Bernstein Bank wishes 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