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22.04.2022 – The Federal Reserve is getting serious: Even Jerome Powell has set investors on a more aggressive tightening course. Raising the federal funds rate by 0.5 percentage point at the upcoming May meeting “is definitely an option,” he said yesterday. Investors ran for cover.

Those who had still hoped that the Fed would postpone tightening because of the threat of recession were proven wrong. At his last appearance before the Quiet Period in the course of the May Fed meeting, Powell shattered all bulls’ dreams at the International Monetary Fund in Washington, D.C.. Ergo, shareholders reacted in shock. You can see the reaction to Powell very nicely in the hourly chart of the Nasdaq 100. As always, don’t trade around the Fed. Whenever the lords of money appear in public, caution is the order of the day for traders.

Source: Bernstein Bank GmbH

At the debate in the US capital, Powell justified his stance: “the US labor market is too hot… unsustainably hot.” Such strong words are rarely heard from the rather soft Fed chief. Normally, the Fed raises interest rates by only 0.25 percentage points. But not without reason, many investors accuse the U.S. central bank of having overslept the development and being “behind the curve,” which is why it now has to proceed too drastically – we recently highlighted this topic here. In fact, with inflation at 8.5 percent, quick action is called for.

75 basis points possible

And that is precisely why there may be more to come. A few days ago, the hawkish James Bullard, head of the Federal Reserve Bank of St. Louis, expressed himself even more harshly. He even brought an interest rate hike of 75 basis points into play and hinted that the Fed could raise the key rate to 3.5 percent by the fourth quarter of 2022. Currently, that’s in a range of 0.25 to 0.50 percent.

And Mary Daly, president of the San Francisco Federal Reserve, also announced a series of rate hikes on Wednesday. In doing so, she herself accepted the risk of a recession – but that is unlikely to happen, and if it does, it will only be moderate, she said at the University of Nevada Las Vegas. So Daly is assuming a soft landing. We’re not the only ones skeptical about the worst inflation rate in 40 years.

Cash drain in the market

As it stands, a lot of liquidity is being drained from the market because of inflation. Still, that might not help the economy. That’s because we’re currently experiencing the opposite of a Goldilocks Economy, many Wall Street veterans believe. That’s a state in which Goldilocks – that is, the typical investor – is happy because the economy is running neither too hot nor too cold. That is, moderate economic growth accompanied by low inflation, which allows for market-friendly monetary policy.

Too hot and too cold

In contrast, the current economy is running too hot (inflation) in some places, such as wages and energy costs. And at the same time, it is too cold elsewhere and threatens to crash, for example in retail or the chemical industry, as well as in exports in the wake of the Ukraine sanctions (recession). The result: stagflation. Rising prices, collapsing sales, high costs for raw materials and energy, and expensive loans. All this is poison for the stock market. Bernstein Bank keeps 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

20.04.2022 – Now it’s down to the wire for oil: According to the investment bank JP Morgan, the price of a barrel of Brent will soon reach $185 in the worst case scenario. According to an insider source, the European Union will impose an embargo on Russia in the coming week.

The oil bulls are slowly warming up. If a total embargo is in the offing, we should see a repeat of the reaction in Brent – shown here in the daily chart – as at the beginning of the war. Even if new punitive measures turn out to be more moderate, the long-term trend is set. Whatever the case, something is brewing.

Source: Bernstein Bank GmbH

According to Reuters, the EU wants to impose a boycott on Russian oil immediately after the second round of the French presidential election this weekend. Russian oil is still flowing unabated – so the West is financing the Russian state budget. JPMorgan noted that supplies from Russia in the seven days to April 16 were 7.3 million barrels a day – just below February’s pre-war average of 7.58 mbd.

Complete embargo

JPM Oil analyst Natasha Kaneva now examined three possible types of embargo, noting that “any immediate embargo measure taken by the European Commission will have a severe impact on the global oil market with risks to price entirely to the upside in the short-term.” Option one, he said, is the most extreme form: A full and immediate embargo. This would drive up the price of Brent to $185 per barrel, as 4 million barrels per day would immediately be lost.

Import tariffs and price caps

Variants Two and Three are more conservative – namely, higher import taxes or price curbs on Russian imports, he said. With a tariff surcharge of 90 percent or a price cap of $20 per barrel, the EU could save face, demonstrate strength, and continue to buy oil. The $20 difference from the market price could go into an escrow account to fund Ukraine’s reconstruction. With a slow embargo, extending over a four-month adjustment period, as with coal, the price would barely move in the short term.
JPM suspects European buyers will cut supplies from Russia by 2.0 to 2.5 barrels per day by year-end – and Moscow will only find substitutes for 1 mbd. China, India and Turkey in particular were now grabbing Russian oil at a discount. Already, major European refiners and traders had cut spot purchases to the tune of 2.1 mbd, he said. Soft embargoes would also definitely hit Russia, the report continued. This is because the margin for Russia is only $10 per barrel.

Possible Russian counter-reaction

We add: While Saudi oil is very easy to extract in the desert sands because it is lower in the ground and costs are low because ports are also close, it is different in Russia. In the Siberian permafrost, deep drilling is expensive, plus there are high transport costs due to long pipelines or trains. Presumably, however, even with the softer embargo variants, Moscow would stop deliveries of its own accord, since the money would then flow from the West to Kiev. The consequence would then be a delayed jump in prices.

Stalled offensive

Which brings us back to a possible startle reaction of the market. Still an escalation by a frustrated President Vladimir Putin is quite possible. Because if the U.S. think tank Institute for the Study of War is right, the current Russian major offensive in Ukraine is not going smoothly either. According to ISW in Washington, D.C., Putin desperately wants a success by Victory Day – we had already pointed out this important event on May 9. And that is why the Russian army continues to proceed too hastily, poorly organized and bumbling – despite the massive bombardments from the air, the Russians are hardly making any progress on the ground. So what comes next? A frustration nuclear strike? A victory for Ukraine? A coup in Moscow? An unexpected peace? All of this would have an impact on the energy market and the stock markets. Exactly the same would be the case if the EU chickened out on oil and did nothing at all – then a lot of long positions would be liquidated. Bernstein Bank keeps an eye on the situation 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

19.04.2022 – The Russian Central Bank has managed to stabilize the ruble – the currency is trading at its pre-Ukraine invasion level. However, it is unclear how long this feat will last. In any case, the central bank has now warned of the consequences of the war with unusual frankness. We explain what this could mean for traders and investors.

Almost simultaneously with the start of the Russian large-scale offensive in eastern Ukraine and parallel to the euphemistic statements of President Vladimir Putin that the Western economic “blitzkrieg” has been ineffective, the Russian central bank warned of harsh consequences. The situation is obviously serious: We suspect that the ruble will soon become a real short investment again.

Source: Bernstein Bank GmbH

For we are hearing unusually open and honest words from Moscow: The head of the Russian central bank, Elvira Nabiullina, made it clear yesterday, Easter Monday, that the sanctions imposed by the West are having an effect. In an address to the Duma, she stressed that the period during which Russia could live off its reserves would be limited.

Burned reserves

By way of background, Russia cannot use about half of its $640 billion in foreign exchange reserves because they are frozen in the West. The question is how many dollars and euros have already been burned as Moscow sold foreign currency to prop up the ruble. According to Bloomberg, Russia currently holds mostly yuan and gold. Presumably, Beijing will continue to step in with swaps for a while: China sells Russia dollars for yuan – making the Chinese currency interesting on the long side. Moscow then sells these Chinese dollars and uses them to buy rubles to stabilize the domestic currency. But even these reserves are finite.
The head of the central bank did not give the all-clear for inflation: The target of 4 percent inflation will probably not be reached until 2024. Inflation is currently at 17.5 percent, the highest level in more than two decades. So far, Western sanctions have only affected the financial market. This is now changing – the Russian real economy is suffering, Nabiullina added.

Blow to the economy

Fittingly, a warning arrived from Moscow Mayor Sergei Sobyanin: “According to our estimates, about 200,000 people are at risk of losing their jobs,” he said on his website Monday. To cushion the impact of unemployment, he said, authorities last week approved an aid program worth the equivalent of 38 million euros. So it’s going to be expensive.
And the toughest stage of all sanctions – a total boycott of coal, gas and oil by the West – has not even been reached yet. That could soon be the case if Russia escalates its barbaric war against civilians in Ukraine as well. Already, the World Bank has warned that the Russian economy will shrink by 11.2 percent this year. Although the interest rate hike has stabilized the ruble, it has stifled the economy by making new loans more expensive. In response to the sanctions, the Russian central bank initially more than doubled its key interest rate to 20 percent, but then lowered it again to 17 percent.

There is little to be said for the ruble

Moscow will probably have to print new rubles, which is likely to sink it again. Undoubtedly, the economic boycott that has begun in the West will also further weaken the ruble from a real economic perspective: Companies closing their local branches previously had to exchange dollars or euros for rubles to pay their Russian employees or keep their factories running. Now almost all Westerners are gone. This makes the ruble less in demand.
The conclusion from all this is that we do not see any supportive bullish factors for the ruble at the moment. These are likely to occur only when trade relations normalize after the war ends. Or, miraculously, new players emerge to supply fresh dollars to Moscow. If neither occurs, it is only a matter of time before the ruble plumbs new lows. 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

14.04.2022 – So it’s true: Elon Musk wants to buy Twitter. It is quite possible that Musk will have to deliver a second helping. But if the hostile takeover attempt fails, the bears can rejoice. That is certainly possible. Because Twitter is not just any company. It is an important opinion channel for the woke cultural chic in the USA. That’s why the resistance of the good, better and best people in the American power structure is likely to be enormous.

The richest man in the world is offering $54.20 per share for Twitter, or just under 50 euros. He says the company has extraordinary potential, which he will leverage. Musk’s offer is 54 percent higher than the price at the end of January. Congratulations to all traders who had the right nose. Twitter is now worth around 43 billion dollars. Musk can afford it: his assets amount to 260 billion dollars, and he has around 80 million followers on Twitter. In the daily chart, you can see that traders have already taken profits. And that the current offer is probably not enough for the stock market – the price was already higher when the 9 percent share was announced on April 4. If Musk follows suit, it will go north again. If not, the gap will be closed.

Source: Bernstein Bank GmbH

And that brings us to the opportunities for the bears. Twitter is not just any company. It is the mouthpiece of the left-wing cultural chic, which would probably lose an important opinion channel with Musk’s purchase. For example, Twitter has problems with former President Donald Trump’s freedom of expression. However, Twitter turns a blind eye to tweets from Islamists or Antifa, the Republican opposition criticizes. This is precisely why Trump launched his own social media channel; and also because of the annoying political one-sidedness, Twitter’s share price had plummeted sharply in recent months.

Musk is too independent

At Twitter, the East and West Coast establishment is likely to raise heaven and hell to stop Musk. Because he’s simply too independent – and unabashedly represents right-wing positions. For example, after Tesla’s plants were closed as a result of the lockdown, he discussed special arrangements with authorities. He also disapproved of the interim curfews in the People’s Republic of California. Specifically, “To say they can’t leave their house and they will be arrested if they do is fascist. That is not democratic, that is not freedom.” Outrageous.

Salute to Sleepy Joe

Musk also has a problem with Joe Biden. For example, the entrepreneur does not like the planned billionaire tax at all. In addition, Musk was annoyed that the U.S. president did not formulate any congratulations to Musk’s space company SpaceX after it made the first space flight with a purely civilian crew. Elon Musk’s comment, “He’s still asleep.” With which he took up the ball from Trump, who had repeatedly referred to Biden as “Sleepy Joe” during the election campaign. He also served on Trump’s economic council. Musk himself has described himself as “half Democrat, half Republican.” He is independent and “politically moderate,” he announced on Twitter in 2018. Very unusual for an entrepreneur from the eco-correct e-industry.

Threat of class action lawsuit

Twitter’s own management is also likely to be spectral of Musk, who announced plans to turn the San Francisco headquarters into an asylum for the homeless. Where will the millionaires have to move to then? In addition, the Dems want to strengthen the power of the unions – Musk wants nothing to do with that. Moreover, Musk is in legal trouble. According to a class action lawsuit filed Tuesday in a federal court in New York, Musk already reached a Twitter shareholding of five percent on March 14, which required him to make his holdings public by March 24. However, this did not happen until April 4. During that period, Musk had further increased his stake to more than 9 percent.

The conclusion from all this: It is quite possible that Musk will drop Twitter again as soon as it becomes too colorful for him. Presumably hedged with put options, he could back out of the deal. This would send the share price plummeting south. So keep an eye on the real-time news – the drama could be prolonged by several acts. Whether long or short – Bernstein Bank wishes 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

12.04.2022 – Upside-down world: Everyone is talking about inflation. And today’s inflation rate from the US is likely to be horrendous again. So why aren’t cryptos gaining? Until now, e-currencies were considered a protection against the destruction of purchasing power. The riddle’s solution: There is a threat of severe deflation – the collapse of parts of the economy – in the near future.

The consensus among most analysts for the U.S. Consumer Price Index (CPI) in March is currently 8.4 percent. That would be the highest level since January 1982, but at that time the Fed Funds rate was 12 percent – compared to just 0.5 percent now. Which shows that the Federal Reserve has some catching up to do. There are already rumblings on the trading floor about a coming interest rate step of 75 basis points.

Source: Bernstein Bank GmbH

Probably also due to the threat of interest rate steps, BTC has fallen sharply in recent days. The picture shows the daily chart with the Bollinger bands (14). For bulls, the recent drift south is an unpleasant surprise. That’s because over the weekend, the Luna Foundation Guard (LFG), which is a Singapore-based nonprofit, had said it had invested $173 million in BTC and provided hope for support.

Recessionary pressure from politicians

But other institutional investors were not in sight. Which is precisely because of several economic and political uncertainty factors, commented Noelle Acheson, head of the market insight team at Genesis Global, which is a financial platform provider based in Malta. So buyers are holding back. Also, she said, the strength of the DXY is playing a role – the “Dixie” is the dollar index. And there we already have an interesting recession signal: cash is king in deflation and then the dollar is sought above all.

Price target 30,000 for BTC

The “Cointelegraph” also pointed out a bearish word from Arthur Hayes, that is the former head of the trading platform Bitmex. He does not trust central banks in their announcements to fight inflation. This is especially true for the Federal Reserve, he said. Rather, it is a sham maneuver to help politicians against angry citizens. The population is working more, but can afford less and less. Then the bearish price target: “By the end of the second quarter in June of this year, I believe Bitcoin and Ether will have tested these levels: Bitcoin: $30,000, Ether: $2,500.”

Threaded supply chain

So that’s the strange world today: while the current environment is inflationary and therefore actually supportive of cryptos. Bitcoin, after all, cannot be multiplied at will like paper money. And now comes the big but: for many commodities – oil, natural gas, grains, metals – a de facto deflationary global shock event is looming. The World Trade Organization, for example, warned that the Russian war on Ukraine could cost the global economy up to 1.3 percentage points of growth. Gross domestic product is expected to grow by only 3.1 to 3.7 percent in 2022, according to model calculations. We add: In addition, new corona lockdowns in China will add further negative factors.

First inflation, then deflation

The consequence of all this is that when supply chains collapse and the economic engine sputters, investors move out of assets and into cash. Share prices fall. Especially since many people could lose their jobs and need reserves to make ends meet. So inflation is the current danger. And deflation is the big medium-term risk. One thing usually leads to another, because people skimp when prices rise, which ultimately hits industry. Bernstein Bank keeps an eye on the situation 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

08.04.2022 – NATO will now supply Ukraine with heavy weapons. And the U.S. is launching the Lend-Lease Act, which will give Kiev virtually unlimited access to American weapons. Tough times for traders and investors – the war is just getting started. We shed light on the background and look at four possible scenarios.

The Bucha massacre has changed everything. The West now sees heavy weapons as defensive. Apparently, the first tanks are already heading for Ukraine. Investors have not really registered this yet. In the weekly chart, the Dow Jones is trying to regain the 50 line. From below, the 200 line and the low from the Corona crash are tempting.

Source: Bernstein Bank GmbH

The tussle of arms in Ukraine may soon resemble World War II with open field battles. Another parallel: apparently Russian Speznas commandos in dark green and black uniforms, different from the spotted camouflage of the conventional army, have carried out ethnic cleansing. Interrogations, rapes, shootings. This is indicated by intercepted telephone calls, satellite images, witness statements, found ammunition boxes and insignia. This is reminiscent of the Einsatzgruppen of SS and SD behind the Eastern Front. The Russian Spezialnovo Nasnachenija, units for special use, exist for example in the secret service FSB and the military secret service GRU.

Threat of a major Russian offensive

That’s why NATO is taking off the kid gloves. It is necessary to use the window before Moscow launches its next major attack and is in a “decisive phase,” NATO Secretary General Jens Stoltenberg said Tuesday. It will take “several weeks” for Russian troops to regroup and be armed, he said. In that window of time, he said, it is extremely important that NATO allies provide support. Indeed, cell phone videos of platoons of Russian tanks rolling toward Ukraine have been circulating on the Internet.

Tanks and air defense

According to the “Frankfurter Allgemeine Zeitung,” there are also signs in the West that a veritable armed force is being built up: 35 states participated in an arms builders’ conference last week. According to the British, the participants committed themselves to providing Ukraine with air and coastal defense systems, artillery and anti-artillery capabilities, armored and protected vehicles. Even Berlin is probably allowing a Czech company to resell 56 tanks from GDR stocks to Ukraine. It is possible that Germany could also supply used Marder infantry fighting vehicles.

Unlimited weapons through Lend-Lease

Hardly noticed by the local quality media, something historic has also happened in the USA: The Senate has passed the “Ukraine Democracy Defense Lend-Lease Act of 2022”. The House of Representatives still has to approve it, but this is probably a formality. This means that the White House no longer needs to have its own budget approved by Congress for arms deliveries – the president can decide everything on his own via directive without bureaucracy. Ukraine can use the weapons now and pay for them later (maybe). Such a law already brought the decisive turnaround in World War II, when the USA massively rearmed Great Britain and the USSR against Nazi Germany before entering the war itself.

Four options

Thus, the financial market faces four possible developments. First, either the Kremlin relents soon and pulls back. That would be a bullish case for stocks and a return to normalcy. Second: Or we see a war that dwarfs everything that has gone before – with a possible escalation because Vladimir Putin sees the West’s armament as a declaration of war or uses nuclear weapons in the face of certain defeat. Then we don’t need to talk about investments anymore. Third, Ukraine wins a conventional war, Putin is deposed or no longer dares new adventures. That would also be bullish. Fourth: Or Russia is victorious, secedes the Donbass or suppresses Ukraine in an occupation lasting for years. In that case, we can expect a collapse in prices at first, but then a slow return to day-to-day trading.
Our advice: prepare for a potential violent quake on the stock market, use the time. Deutsche Bank just warned in an analysis that the war has already caused turmoil in several energy, food and commodity markets, further disrupting the supply chain. We think: There may be more to come. Bernstein Bank hopes for peace soon and keeps an eye on the situation 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

07.04.2022 – Incredible but true: The Federal Reserve is serious. It actually wants to suck a lot of money out of the market. Those who still didn’t get it after Fed Vice Chairman Lael Brainard’s previous statements now learned it from the minutes of the March meeting. The market is waking up to reality: the financial market needs to be shrunk to fight inflation.

Some traders just aren’t hearing the signals. Yet the Federal Reserve has been unusually clear in communicating what it discusses behind closed doors. The Fed Minutes now confirmed the shrinkage: there can be no doubt that the central bank will suck a lot of money out of the market. Stocks, bonds and cryptos went down for the time being after the publication. Nevertheless, the market is still undecided about how to proceed in the medium term. But a decision in one direction or the other is on the horizon, as shown once again by looking at the Nasdaq 100 – high-tech stocks are nervously holding between the 200- and 50-day lines (below). We suspect that they will be the first to show the way ahead.

Source: Bernstein Bank GmbH

Das Finanzblog „ZeroHedge“ kommentierte, wir hätten es mit einem „reverse wealth effect“ zu tun – also mit einer Umkehrung des Wohlstandes. Vulgo: Weniger Geld für Investoren. Alles in allem seien die Fed Minutes „more hawkish than expected on rate-hikes and QT“ ausgefallen, also in Bezug auf höhere Zinsen und das Quantitative Tightening. So dürfte es ein Abschmelzen der Fed-Bilanz von rund 95 Milliarden Dollar pro Monat geben – die meisten Analysten hatten 60 bis 90 Milliarden erwartet. Gleich mehrere Mitglieder der Fed sprachen sich zudem für ungewöhnlich kräftige Zinsschritte von 50 Basispunkten aus. Ferner befürchte die Notenbank einen Vertrauensverlust in der Öffentlichkeit bezüglich der Entschlossenheit bei der Inflationsbekämpfung.

Mehrere Falken in der Fed

JPMorgan hatte vor der gestrigen Veröffentlichung der Fed Minutes noch geschrieben, die vorherige Marktreaktion auf die hawkishen Aussagen von Lael Brainard seien überzogen. Doch warum tauchten die Kurse dann noch weiter ab? Wir meinen: Weil die Hoffnung bestand, dass die Fed aus Angst vor einer Rezession doch nicht so entschlossen auftritt. Diese Illusion ist jetzt zerplatzt. Brainard äußerte zudem keine Einzelmeinung – mehrere Direktoren wollen entschieden vorgehen, um die höchste Teuerungsrate seit vier Jahrzehnten zu drücken.
Der frühere Chef der Federal Reserve of New York, Bill Dudley, jedenfalls kommentierte in einem Video-Blog die Vermutung, dass die Fed unbedingt den Finanzmarkt drücken müssen, um die Inflation zu bekämpfen. Das Tightening werde so lange laufen, wie die Kurse oben seien, urteilte der jetzige Volkswirt von Goldman Sachs. Unser Fazit aus alledem: Die generelle Tendenz an der Börse ist bearish. Was nicht heißt, dass es mitunter Erholungsrallys gibt. Die Bernstein Bank behält die Lage für Sie im Blick!

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

06.04.2022 – So there it is: The Federal Reserve is not shying away from a possible recession. And is once again announcing a determined fight against inflation. Quantitative tightening is to begin in May. Too much, too late? Skepticism is spreading on the stock market.

This is what the bears on Wall Street had been waiting for: According to Fed Director Lael Brainard, a series of interest rate hikes is imminent and a meltdown of the balance sheet is imminent. Most seriously, she said, the Fed would begin Quantitative Tightening as early as May. Moreover, everything could go even more decisively than expected. The stock market’s reaction: The interest-rate-sensitive high-tech stocks in particular reacted in a shocked manner. The Nasdaq 100 currently sits directionless in no-man’s land between the 200 and 50-day lines (below).

Source: Bernstein Bank GmbH

The Federal Reserve’s portfolio, which ballooned to nearly $9 trillion in the Corona pandemic, is being reduced at a much faster pace than in the last contraction from 2017 to 2019, the Fed’s vice chair stressed at a Minneapolis Fed conference yesterday (Tuesday). Brainard verbatim: “Currently, inflation is much too high and is subject to upside risks. (…) It is of paramount importance to get inflation down.” Accordingly, the Fed is “prepared to take stronger action if indicators of inflation and inflation expectations indicate that such action is warranted.”

Behind the curve

Hear, hear – actually the lady was known as a dove so far. So there must be something wrong with the U.S. economy. And worries were already circulating that the Fed was reacting too strongly too late. And slowing down the economy into a recession. Once again, the word made the rounds that the Fed is “behind the curve”, i.e. that it is lagging behind events. Phoenix Capital Research, for example, quipped that the Fed needs to be extremely aggressive – the Taylor Rule states that interest rates need to rise to 9.5 percent. You should Google this complicated Taylor Rule; the explanation would take up too much space here. Anyway, Phoenix Capital Research judged the Fed would trigger a recession in about six months.

Inflation and Ukraine war

Deutsche Bank also just warned of a recession – and not only in the USA. But also in Europe in the next two years. The reasons: The war in Ukraine and high inflation in America and Europe. The current rate of around 8 percent is more than previously expected. The experts therefore expect an interest rate step of 250 basis points from the European Central Bank between this September and next December. The Fed’s tightening will lead to negative yield growth in the U.S. between fall/winter 2023/24, they say.

Our conclusion: we wonder how a new bull market will be forthcoming in these times. The Fed fears inflation more than deflation. Whether that is smart remains to be seen. And more problems are building up right now in eastern Ukraine, the Russian army is regrouping. This has to worry every trader and investor – keep an eye on the realtime news. 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

01.04.2022 – Loud winners in these troubled times. On the one hand, Moscow has successfully stabilised the rouble. On the other, Russia has occupied the Donbass as planned and also the south of Ukraine. However, Kiev is defending itself heroically, the Ukrainian army is advancing successfully. We suspect that the really tough battle is just beginning – with consequences for the financial market.

Success for the Russian central bank: The rouble has almost returned to its level before the Russian attack on Ukraine. The USDRUB exchange rate gap at the beginning of the war has almost completely closed again. It is always impressive how reliable the basics of chart analysis are. The back and forth over gas supplies in roubles or euros and dollars will probably continue to determine the fortunes of the Russian currency.

Source: Bernstein Bank GmbH

But all traders and investors need to be extra careful from now on and keep a closer eye on the real-time news. The Russian army is regrouping and the next few weeks are likely to be particularly bloody.

Key date 09 May

For on 09 May Victory Day rises in Russia – a monumental holiday with enormous significance for Russians. By this День Победы (Djen Pabjedi), things must have gone for Vladimir Putin. Whoever witnessed the celebrations in Moscow or Saint-Petersburg is deeply impressed: always brilliant weather – allegedly the Russian air force rains down clouds with chemicals. Children hand balloons and flowers to ancient World War II veterans. Cossack bands, military parade, gratitude and pride.
And this time? If the Kremlin gets its way, then everything will continue as before. But if Vladimir Putin does not manage a victory in Ukraine and thousands of coffins and war veterans return, reporting on incompetence and corruption in the army, the mood in Russia will tip. And then it will be dangerous for Putin.

No danger from the masses

This is what the Moscow Times, for example, believes. The paper states that Putin can rely on 70 percent of the population. The majority of the people are nationalistic, apolitical, ill-informed, hate the West because of years of indoctrination, but have seldom or never been there, especially not in America, at best in Egypt or Turkey. There will be no revolution with these people, this mass follows the television.
Furthermore, there are about 20 per cent who profit from the system, work in internationally active Russian companies and perhaps even own a small flat abroad. There are already a few grumblings here. And in the top 1 to 2 per cent who have become rich in the power apparatus or as decision-makers among the oligarchs, who own a chalet abroad and bank accounts in Switzerland, there is even ferment. These Putin profiteers would have to watch their paradisiacal lives vanish into thin air: their accounts blocked, plus the risk that they and their families would turn into nuclear ash. This is not how they had imagined the deal with Putin. We add: Especially since Putin now also wants to take over their share of around 20 per cent of the gas business – if everything is to be run via Gazprombank or the Russian Central Bank, the oligarchs are left out in the cold.

Possible coup from the elite

Ergo, the “Moscow Times” believes that a coup against Putin will come from within this elite. As with the deposition of Nikita Khrushchev in 1964, the assassination of Tsar Pavel in 1801 and the strange death of Josef Stalin. We explain: intelligence chief Lavrenti Beria simply let Stalin die in 1953 after a stroke – he forbade access for days; Stalin’s personal doctors, who might have been able to save him, had already been arrested anyway in the course of an anti-Semitic purge. What an irony of history: Stalin had planned the deportation of all Soviet Jews to Siberia in the Birobidzhan oblast. Beria saw himself in power and literally celebrated Stalin’s death. Until he himself was eliminated.

So: history teaches that nothing is impossible. Both a brutal Russian victory in Ukraine. Or an escalation with an attack on Poland or the Baltic States. Or even a nuclear war. But also a quick end. And that will be the real day of victory: If Vladimir Putin is removed, the stock markets will explode. Precisely because hardly anyone believes in this option so far. Bernstein Bank is keeping an eye on the situation 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

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!

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