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28.03.2022 – Rarely have traders and investors been as perplexed as they are now. Has the financial market ticked off the Ukraine war? What about the Federal Reserve and the threat of recession? We let a bear have his say once again – who draws an interesting historical parallel to the Yom Kippur War.

Mark Dittli, editor-in-chief of “The Market NZZ” sheds light on the events for the “Neue Züricher Zeitung” – and is pessimistic. It is quite possible that the S&P 500 will come close to its all-time high of 4800 points, which it reached on 4 January. But the situation is deceptive, this is only a bear market rally. In our picture the SPX in the daily chart with the 200-day line.

Source: Bernstein Bank GmbH

Dittli has two explanations for the upward movement that has been going on since 8 March. On the one hand, a lot of money has flowed from American government bonds into the stock market. In fact, the bond market has really crashed. Since the beginning of March, the yield on ten-year Treasury notes has risen by 76 basis points to 2.49 per cent. The yield on two-year Treasuries shot up by almost 100 basis points to 2.3 per cent. All in all, this is the third worst loss for US bonds in the past hundred years. On the other hand, cover buying had boosted equities. By the way, Goldman Sachs has also just stated a big bear market squeeze and predicted sales on Wall Street because of the upcoming tax deadline in mid-April.

Supply shock like in the Yom Kippur War

This brings us to a look at the history books. Just as in the 1973 Yom Kippur War, the Ukraine war is triggering a supply shock on the energy markets, writes the NZZ. The oil shock at that time also hit the US economy at a time when it was already struggling with rising inflationary pressure and the Federal Reserve had begun to tighten monetary policy. Dittli says: “The effects of the Arab oil embargo drove the US inflation rate to 12% by the end of 1974 and the fed funds rate to almost 13%. As early as December 1973, the US economy fell into a recession that would last until March 1975.” All this sent the S&P 500 down 44 per cent in one year. Remarkable in this context, he said, was a recent study by the Federal Reserve Bank of Dallas comparing today’s energy price shock with the 1970s.

Too much too late

The Fed has just started the cycle of interest rate hikes – but Fed Chairman Jerome Powell has hesitated far too long and now has to turn the monetary policy wheel hard and fight inflation. The financial markets are facing a liquidity withdrawal in the coming months the likes of which they have not seen in decades. A successful soft landing is unlikely. In the almost sixty years since 1965, the Fed has carried out eleven interest rate hike cycles. Eight of these have led to a recession. Only three times – in 1965, 1983 and 1994 – had a “soft landing” been achieved.
Dittli repeated his recommendation to use recovery rallies on the stock markets for sales and to build up the cash position in the portfolio. As always, we advise to keep dissenting voices in mind and to follow the real-time news closely. 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

23.03.2022 – The current situation on Wall Street is pretty much like 2008, at least according to the U.S.-based investment firm RIA Advisors. In terms of the chart, a long-term shoulder-head-shoulder formation was formed in the S&P 500 back then – just like now. The question of all questions for investors and traders is: Will there be a recession or not?

RIA Advisors is a Houston, Texas investment firm with over $1 billion in assets under management – the firm has caught our eye several times for interesting analysis. Reason enough to include the chart note first this time as well. Is the S&P 500 currently forming a shoulder-head-shoulder formation in the weekly chart? Maybe – judge for yourself if you recognize Shoulder-Head-Shoulder.

Source: Bernstein Bank GmbH

In any case, Lance Roberts of RealInvestmentAdvice.com discovered another parallel. In January 2008, Ben Bernanke, then head of the Federal Reserve, said: “The Federal Reserve is not currently forecasting a recession. Last week, current Fed Chairman Jerome Powell told the press: “In my view, the probability of a recession within the next year is not particularly elevated.” At the time, a lot of advisors would have advised buying the dips. Just like now again. And then it did come, the recession – triggered by the subprime crisis, the collapse of Lehman Brothers and Bear Stearns. And the market dipped. The surprise for the market in 2008 was the collapse of major financial institutions. Everyone had expected Washington to bail out the systemically important banks.

Recession or not?

This time, it could be the fact that Vladimir Putin is going through with his war of aggression after all. After all, the mood in the market lately has tended toward a cease-fire or even a Ukrainian victory. So what could trigger a recession in the U.S. and the world today? First and foremost, the sharp rise in the price of energy in the wake of an escalating Ukraine war after all. Here are the possible triggers for that: Belarus intervenes in the war. China supplies Russia with weapons and is sanctioned. Russia wins the war, installs a puppet regime in Ukraine. And then imposes an energy embargo on the West as punishment for supporting Kiev. Then Russia attacks the Baltic states to close the corridor to Kaliningrad – and certain rag-tag Western countries ignore this attack on NATO countries. Or, in the event of an escalation, the West wrestles its way to a total boycott of Russian energy.

The Fed Factor

The Federal Reserve could also make its contribution to a recession – precisely because it does not see one. Many investors fear that by raising interest rates too much, it could slow down an economy plagued by covid and the fallout from the Ukraine war. Goldman Sachs, by the way, now sees two big rate hikes of 50 basis points in May and June – up from 25 previously. This is to be followed by four more rate hikes of 25 points this year and two next year. As always, 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

21.03.2022 – Due to the Ukraine war and the interest rate turnaround in the USA, an important market has recently been somewhat forgotten. But now China is back: An interesting turnaround has taken place in the Middle Kingdom. The communist party has ended the attack against its most successful corporations. Verbally, at least. Will the thaw last? 

Until the beginning of last week, there was a real slaughter on the Hong Kong and Shanghai stock exchanges. As a result, the US investment bank JP Morgan called the entire Chinese tech sector “uninvestable.” The experts advised against buying into Alibaba, for example. On the Nasdaq, the Golden Dragon China Index slid 13 percent in response to this analysis. But Alibaba, of all stocks, turned into a thunderous price rocket since mid-week. Here is the four-hour chart of Alibaba – there is still a long way to go to the old price highs at around 320.

Source: Bernstein Bank GmbH

This is what had happened: Beijing had brought the market to its knees in recent months with an unexpected and radical wave of regulation by the party leadership against all Internet companies. We had reported on this. On the one hand, this was about breaking up oligopolies and allegedly about customer data protection. Above all, head of state Xi Jinping wanted to put his most successful entrepreneurs in their place – the red emperor does not tolerate any overconfident princes next to him. Countless successful high-tech companies were prevented from listing on the New York stock exchange. Founders said goodbye, companies fired employees.

Turnaround in Beijing

But midweek, the bullish intervention from Beijing. Liu He, Vice Premier of the People’s Republic of China in charge of economics and finance, signaled a willingness to talk about overseas listings and corporate loans. Liu He is regarded as the right-hand man of the President of the People’s Republic, and his word carries weight: he promised to introduce measures to support the economy and to support initial listings of his companies abroad in the future. In a coordinated action, the Ministry of Finance, the central bank, the supervisory authorities in the foreign exchange market, the banking and insurance sectors also promised to do everything possible to stabilize the market and strengthen the economy. On the Nasdaq, the previously battered Golden Dragon China Index took off by about a third after the news.

Spillover effect

The bottom line is that it is completely impossible to predict whether the new bull market will carry and whether the red rulers will now leave the economy alone. Apparently, a power struggle is raging between realists and ideologues in the Communist Party. Given the Corona fallout and the economy’s contraction, realpolitik may again be the order of the day. If that continues, there is some catching up to do for the bulls. However, it is unclear whether China, as a supporter of Russia, will not be subject to sanctions. 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

17.03.2022 – The Federal Reserve is raising interest rates for the first time since 2018. And announces six more interest rate steps at once. First it went down. Then stock prices took off. Because the Fed postponed Quantitative Tightening until the next meeting.

Yesterday, there was some confusion – a feast for traders who were on the right side. We always say: Don’t trade around the Fed. First, prices rose on news about the Ukraine war. Then the bulls reacted angrily to the six more interest rate steps for 2022. Finally, the most important message: Jerome Powell postponed the liftoff until later: “The Committee expects to begin reducing its holdings of Treasury securities and agency debt and agency mortgage-backed securities at a coming meeting.” Here is the market reaction in the four-hour chart of the Nasdaq 100.

Source: Bernstein Bank GmbH

An important turnaround: In his address to the Senate Banking Committee a few days ago, Powell had still announced, according to the financial blog “ZeroHedge”, that the Fed would provide clarity on the shrinking of the balance sheet as early as this meeting. The balance sheet total has grown to a good nine trillion dollars. In the event of a reduction in quantitative easing (QE) – i.e. quantitative tightening (QT) – maturing bonds would no longer be fully replaced. Liquidity would thus be withdrawn from the market. The message on QT could therefore have been much stronger. Already, some brokers are showing hope that the Fed will perhaps stop the exit from QE in the event of a new recession. This would provide the stock market with more liquidity again.

US interest rate turnaround

Otherwise, much came about as analysts had expected. The Fed first raised its key interest rate by 0.25 percentage points to a range of 0.25 to 0.5 percent. Meanwhile, the prevailing view is that it will only be 50 points if the central bank wants to cool the stock market down a bit. With six more rate hikes in 2022, the U.S. federal funds rate would be in the 1.75 to 2.0 percent range by year’s end. In December, Fed members were still assuming an average of three rate hikes.
Powell expressed that the likelihood of a recession is not particularly elevated at this time. Some brokers consider this assumption a “policy error” – soon the Fed will have to correct itself here. The Fed also lowered its expectations for U.S. economic growth. Accordingly, the gross domestic product is expected to grow by 2.8 percent – that is 1.2 percentage points less than forecast in December.

Recession versus inflation

The Fed is caught between the mandate to prevent a recession on the one hand. And on the other hand, to stop inflation. Indeed, inflation continues to pick up: Consumer prices had risen to 7.9 percent in February, the fastest pace in 40 years. Scott Minerd of asset manager Guggenheim commented on Bloomberg TV, “I think they are in an inflation panic.”
Our conclusion: once the U.S. slips into recession, the Fed may indeed postpone QT and start new QE. Any statement in this direction is likely to drive rates. On the other hand, stronger-than-planned interest rate moves and a strengthening economy could trigger new interest rate fears – and sharp corrections on the stock market. And then there is the issue of Ukraine. 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

16.03.2022 – Traders, pay attention: The next few days will be decisive. Experts assume that Russia will lose the war. In case of a ceasefire under Ukrainian victory sign or even an expulsion of the Russian army, a mega bull market is in the offing. Or else a Nero order from Vladimir Putin.

Up or down – if Russia really loses, either a celebration of joy or a world conflagration is possible. For as soon as Putin realizes that his plan for the reconstruction of a Greater Russian Empire has failed, anything would be possible for him. If you want to know which thinkers have influenced the Russian president, you should read up on Alexander Denikin (general with the Whites in the Civil War) and Alexander Dugin (co-founder of the now banned National Bolshevik Party). In the event of a poison gas attack or a nuclear strike by Russia, as well as a revenge attack on a NATO country like Poland, the major indices are likely to easily plunge by double digits in one day. And the nice little DAX relief rally of the past few days (target: 200-day line) in the hope of a settlement of the conflict is history.

Source: Bernstein Bank GmbH

And with that, we turn to the forecasts mentioned at the beginning. The always readable “Tichy’s insight” first quoted General Waldemar Skrzypczak, former head of the Polish land forces. He told the news magazine “wPolityce” that the Russians had already lost the war. Their army was demoralized, and out of despair they were killing civilians. The Russians bombed Kiev to break the Ukrainians’ will to defend themselves – they had “gone over to terror warfare” and wanted to bomb Ukrainian President Volodimir Zelensky to the negotiating table.

Ukraine counteroffensive

To the west of Mikolayiv in southern Ukraine, the Ukrainians had crushed a combat group of the Russian army. The same had happened in the northeast south of Ochtyrka. The Russians would have run out of operational reserves. Syrian mercenaries had no fighting power; Russia could not count on the Belarusian army – then there would be a threat of an uprising in Belarus. Furthermore, Belarusian soldiers could defect to the Ukrainians.

China probably changes sides

The magazine also refers to China. Hu Wie, head of the “Central Institute of History and Culture”, has analyzed that Moscow is not able to achieve its strategic goals in Ukraine. The blitzkrieg had failed. Moscow’s only option now is peace negotiations. The geostrategic consequences: The conflict could escalate, and perhaps the West would intervene after all. Moreover, Russia does not have sufficient means to control Ukraine militarily. The sense of defeat could lead to Russia’s destabilization. The U.S., on the other hand, had regained its leadership position in the Western world. The strength of the West is increasing overall. Thus, Hu Wei now sees the danger that China could end up isolating itself economically (and politically) if it were to tie itself too closely to Russia.
Our conclusion: If all this is true, we are in for hot days. Mega bull market, if the Russian leadership agrees to a compromise and the guns stay silent. Or super bearish if Moscow escalates. 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

15.03.2022 – There is still the threat of an intensification of the economic war against Russia. Or the extension of Western sanctions to China. The Corona consequences have not yet been eliminated. Already, a global recession seems as certain as the Amen in the church. Let’s let a perma-bear have his say today.

Credit is cracking

Michael Hartnett, a strategist at Bank of America, recently warned that the corporate bond market is drying up. In other words, companies are getting less and less money in the market. This is a harbinger of a severe recession, which, according to Hartnett, will occur in the second half of the year at the latest. We think: That could mean toppling banks and teetering companies, plus falling corporate profits because people aren’t spending their money for fear of unemployment. This is not a good omen for the Dow Jones, for example, which we see here in the daily chart – it continues to trade below the 50-day moving average.

Previously, Hartnett had already addressed the scenario of a world at war. According to him, the war in Ukraine means a larger inflation shock, a smaller rates shock, and a more severe recession shock. The Federal Reserve and the European Central Bank are hopelessly caught between deflation on Wall Street and inflation on Main Street.

Loud warning signs

Mega-bear Hartnett sees a lot of troubling signs. Such as: Emerging market debt, China credit, China tech, biotech, forex. His antidote: “we are short tech, credit, private equity as era of excess QE over; we are long volatility, high quality, defensives on recession risk; we are long oil, energy, real assets on inflation; dislocation to financial plumbing delays entry to postponed reopening China/Asia/EM credit on (very) distressed yields.”
Of course, equities would not dive south unchecked – any news of a de-escalation in Ukraine would trigger a fierce bear market rally. But that would hardly change the long-term picture.

Stagflation ahead

Goldman Sachs, by the way, recently put the risk of a U.S. recession in the medium term at 35 percent. The investment bank pointed to the high oil prices and the collateral damage from the Ukraine war. Now the story on Wall Street has changed from reflation to stagflation.
Our conclusion: keep an eye on the real-time news. Much, if not all, now depends on the Federal Reserve in the short term. If it postpones rate hikes in light of the various crises, the stock market should cheer. 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

14.03.2022 – Hopes of a ceasefire are pushing up share prices. Perhaps the Ukraine war will soon be history. The stock market is already positioning itself in this direction. We let rather bullish investment banks have their say, who see light at the end of the tunnel.

On Friday, Goldman Sachs lowered its forecast for the current year – which, paradoxically, is still a moderately bullish assessment. The gold men lowered the outlook for the S&P 500 at the end of the year from 4,900 to 4,700 – which is, however, above the current level. There’s obviously a decision brewing in the SPX, as you can see in the daily chart.

JPMorgan even sees a push north in the short term and recently pointed to the dried up liquidity in the stock market. Specifically, “…if geopolitical news flow improves from here, we could be through worst of it”, but there is always a but…de risking and cumulative selling is still far from levels seen in March 2020 and Jan 2021…”. Thus, JPMorgan expects a $230 billion rebalancing out of bonds and into equities by the end of March. Investors are more overweight in cash than at any time since March 2020, it said.

Cash is waiting to be deployed

Indeed, according to data from analyst firm Refinitiv Lipper, investors pulled out a total of $5.4 billion in the week ending March 09 alone – the largest weekly exodus of capital since April 2020. And that’s exactly when the Corona Crash occurred on the stock markets. And after the bear market, things went up sharply. So maybe stock market history is repeating itself.

Recession largely priced in

However, large daily swings would continue for the time being, JPM further judged. In Europe, 80 percent of a recession is priced in, in the U.S. a maximum of 50 percent. By this is probably meant that in the U.S. because of recession fears could still go a bit further down than in Europe. But probably not much more.

Our conclusion: If there is a sustainable ceasefire in Ukraine, prices will continue to rise. Realistically, politicians and business leaders will then make pilgrimages to Moscow again. The biggest bullish event would be the victory of Ukraine, a withdrawal of the Russians plus an elimination of the Putin regime through a coup in Moscow. That seems rather unlikely at present. 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

08.03.2022 – We venture an outlook on the Ukraine war and upcoming stock market events. Contrary to prevailing opinion, we believe: Kiev can win. We advise all traders to keep powder dry.

Continuing agony

At the moment, the world still assumes that the conflict will drag on for an agonizingly long time. And that Ukraine will be out as a major wheat supplier for a while yet. You can see that in the wheat chart. An escalation of the crisis is also likely to push the prices of commodities such as oil, aluminum, nickel or palladium further north.

Source: Bernstein-Bank GmbH

Russian victory – slow normalization

Most stockbrokers also assume a Russian victory. Then commodity prices would normalize and, as in the case of wheat above, gradually return to the 200-day line. Already, major Wall Street banks are preparing for a return of Russian assets. JPMorgan, for example, published an analysis last Friday with this title: “Russian Corps: If Ifs-And-Buts-Were-Candy-And-Nuts Recovery Analysis; Move LUKOIL, NLMK, MMK to OW.” In it, the bank upgraded corporate bonds of Lukoil, Novolipetsk Steel and Magnitogorsk Iron & Steel to Overweight. Goldman Sachs is also said to have bought bombed-out Russian bonds.

A broken army

But: the Russian army has apparently become a victim of its own ailing system. The evidence we have found in the meantime indicates that corruption is rampant in the procurement system. While high-ranking generals afford ostentatious mansions, field rations for soldiers have sometimes been in disrepair for years. Russian soldiers in Ukraine loot stores because they are hungry. Tires are brittle. Tanks stop because there is no gasoline. Supplies are poorly organized – and right on their own doorstep. Communication does not work because the invaders have cleverly destroyed radio towers. The morale of the troops is said to be lousy – why are the Russians attacking their brother nation? Moreover, no one in the inner circle dares to bring such news to Putin. Now we wonder if the Russians are running out of ammunition.

Ukraine’s victory – mega stock market reaction

Time is playing for Ukraine. If arms shipments from the West arrive, if tightened sanctions drain Russia, this war will be hard for Moscow to win. Watch the real-time news for reports of advancing fresh, highly motivated Ukrainian reservists – if they exist – and a victorious foreign legion: reportedly 16,000 free-armed Westerners want to fight for Ukraine. At the latest, if you see pictures of Russian units surrendering in droves, it’s time for calls on Wall Street and the DAX. And for puts on the above commodities. We wish you good luck – Bernstein Bank keeps an eye on the matter for you!

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

07.03.2022 – Stock markets dive, natural gas and oil jump up. That’s because the U.S. is now discussing an embargo on Russian energy. And Russian President Vladimir Putin has rattled his saber – fears of nuclear war are rife.

Brent shot up briefly to 130 dollars a barrel at the beginning of the week, see chart; West Texas Intermediate cost 130 dollars a barrel before profit-taking set in. The record of around 150 dollars from the summer of 2008 is no longer far away. The price of natural gas in Europe has reached new highs: On Monday, a megawatt hour was temporarily traded for 345 euros in the Netherlands – an increase of around 60 percent.

Source: Bernstein Bank GmbH

U.S. Secretary of State Antony Blinken is responsible for this. He said yesterday on NBC’s “Meet the Press” and other talk shows that the White House was consulting intensively – in an “active discussion” – with allies on whether to impose an embargo on Russian oil imports. Meanwhile, a variant emerged that the U.S. could also suspend imports from Russia on its own.

Stagflation and recession

Either way, all of this continues to fuel inflation – you see it at the gas pump. And thus we slide into stagflation – falling growth, rising prices. Wall Street great Ed Yardeni commented, “for the U.S. economy, we now see stagflation, with persistently higher inflation and less economic growth than expected before the war. (…) For stock investors, we think 2022 will continue to be one of this bull market’s toughest years.” In addition, there is the risk of a new Russian default, as in 1998, which led to the collapse of the hedge fund LTCM. Brent is not likely to bounce back to the 200-day line until there is a global recession, see above.

Shares in reverse gear

First, however, the stock market said: Risk Off. The DAX dipped almost five percent to 12,438 points before recovering. On Friday, the German benchmark index had already slipped by 4.4 percent. Meanwhile, the MSCI Asia-Pacific index has reached a bear market with a minus of about 20 percent since the high from February 2021. Investors also fled to the safe haven of U.S. government bonds. The Swiss franc also strengthened, falling below parity for the first time since January 2015. The Swiss National Bank said it was ready to intervene.

Fear of nuclear war

In addition to the energy hammer, fears of a third world war also weighed. Putin put nuclear forces on alert, sent nuclear submarines to the Barents Sea and mobile missile units on maneuvers in Siberia. We are curious to see when the first Western states will buckle, go back to business as usual and allow Moscow to slaughter Ukraine.

For the stock market, the following remains true: Any escalation in Ukraine means oil long, gold long, stocks short. Kiev’s capitulation and a new Western cuddling course turns the picture. We keep the matter for you in the eye!

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

02.03.2022 – Russia is threatened with national bankruptcy – Moscow has stopped coupon payments for ruble bonds. But there is a far greater threat: Vladimir Putin has de facto gambled everything away. Perhaps he will punish the world for this with a nuclear Nero order.

History could repeat itself with a technical default in the bond market: On August 17, 1998, Russia declared default, after which the hedge fund Long Term Capital Management collapsed, and Wall Street was in shock. Moreover, when news arrived yesterday that NATO foreign ministers would hold an emergency meeting on Friday, prices dived. Is an escalation in the Ukraine war imminent? The recovery is thus faltering, as can be seen in the Dow Jones, which is still well below the 50-day line.

Source: Bernstein Bank GmbH

Especially since the world is threatened by a completely different danger. Putin has lost everything with his invasion of Ukraine. Russia is isolated, its economy is threatened with collapse. New, even more severe sanctions are possible – such as a total boycott of oil, gas and coal from Russia. NATO is arming itself. What else can Putin do? Nothing. How is a Moscow-installed, hated puppet regime supposed to rule this vast country? A long partisan war is foreseeable. Or else, Ukraine wins because it equips tens of thousands of rested reservists with weapons from the West – and the people right along with them. Russian generals have probably also realized all this.

First hairline cracks

Hairline cracks are already appearing in the power structure: The Islamist Chechens who were supposed to eliminate President Selensky were reportedly eliminated after warnings from the FSB. As we read further, Russian soldiers have punctured the tanks of their trucks to avoid having to advance further. Vladimir Putin has changed – he has put on weight, his face is puffy. His recent appearances have been bizarre, especially the huge marble table in the Kremlin, where no real conversation is possible. And that raises the question of how a power politician in a doomsday frenzy reacts. What if Putin’s indirect warning with the use of nuclear weapons last weekend was not an empty bluff?

A world without Russia is supposed to end

In a brilliant article, Thomas Spahn of “Tichy’s Einblick” referred to a March 2018 televised speech by Putin: “Our theoretical plans include a so-called retaliatory counterstrike. Yes, it will be a global catastrophe for humanity. It will be a global disaster for the planet. But as a citizen of Russia and as a Russian president, I ask: Why do we need a world where there is no Russia?” Those who compared Putin to Adolf Hitler were vindicated. For he once wrote in “Mein Kampf”: “Germany will either be a world power or not at all.”
In short, if Putin despairs that the dream of a united, mythical Greater Russia consisting of Russia, Belarus and Ukraine will be shattered, then things will get nasty. Any statement or action in this direction will crash the stock market. Needless to say, conversely, if Russia pulls out of Ukraine or even Putin disappears, prices will explode upward. 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.