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14.01.2022 – There is no escape: After consumer prices, producer prices are also sending an acute warning signal to the stock market. Interest rate fear everywhere. And now, of all times, the biggest ports in China are facing new Corona problems – a new shock in the supply chain. The bears are celebrating.

Producer prices rise as last seen in 1983

Meanwhile, the view is solidifying on the trading floor that the Federal Reserve will raise interest rates not just three times this year, but four. With a first rate hike in March. And some stockbrokers believe the Fed is making a huge mistake by doing so and stalling the economy. Just as it had already classified inflation initially only as a transitional phenomenon.
There they are, the signals of what is likely to come: U.S. inflation is at 7 percent. The Producer Price Index moved up 9.7 percent year-over-year in December. The PPI thus reached a 39-year high. It’s only a matter of time before consumers start feeling the pinch of higher producer prices in their household budgets.

Interest rate fears rage

A look at the details reveals the political and economic explosive nature of this statistic: The sub-index for producer prices for fuels and lubricants rose by a whopping 13 percent. Those who need their cars are impoverished. By contrast, the subindex for automobiles and spare parts fell by 2.7 percent – so people are saving and not buying a new vehicle. The increased saving will sooner or later lead to a recession in the industry.
The price increase is fodder for the Fed: After all, the U.S. Federal Reserve had already warned of an exit from quantitative easing and higher interest rates. Accordingly, prices on the Nasdaq and the S&P 500 in particular dipped. Unprofitable tech stocks in particular were thrown onto the market. We had already pointed out the dangers for these stocks: Those on credit have to fear higher interest rates. The SPX now hangs trembling in the 50-day line. And the inflation hedge Bitcoin is also far from the all-time high in the region of 43,000. Which is probably due to expectations for rising interest rates.

Interest rate turnaround behind the scenes

Another interesting interest rate turnaround factlet: 30-year mortgage rates in the U.S. are picking up. They have now reached 3.52 percent. In early December 2020, it had been 2.85 percent. What does that tell us? Mortgage lenders are now able to push through higher interest rates because home builders are assuming interest rates will rise and prefer to take out a loan now.

Supply shock in China

And now, of all times, a new bad news from China reaches the brokers: In the Middle Kingdom, the crisis in the supply chains is coming to a head because of the Omikron variant. According to Bloomberg, the important Chinese cargo port Ningbo south of Shanghai – the third largest container port in the world – is cancelled. Freight forwarders are stopping work because of Corona. Shipping companies are diverting their ocean liners to Shanghai and Xianmen – but these ports are already overloaded. This is likely to further fuel prices.
The question in this mixed bag is whether we will see a countermovement after the recent small sell-off. Or whether investors prefer to get out before the weekend. 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.

12.01.2022 – For the time being, the market is getting used to the prospect of tighter tapering: Jerome Powell has reaffirmed before the U.S. Senate the will to fight inflation. But he left himself a back door open to tightening monetary policy. As is so often the case, investors are poking around in the fog. The new inflation data should bring clarity, how strongly the Fed steps on the brakes.

The major indices have presented a small countermovement, ditto the Cryptos. Which could be due to short covering, according to Nomura.

Both as well as

Or else to the big both/and from the Federal Reserve. Powell reiterated on Tuesday before the Senate his intention to prevent a solidification of inflation, he wants the quick monetary policy turnaround. Given strong inflation in the U.S., he said the Federal Reserve will “use all tools” to support the economy and a strong labor market. However, Powell sees special factors like Omikron – it could disrupt the supply chain for months to come. And we are a long way from normalcy, he said.
Thus, the Fed must say goodbye to ultra-loose monetary policy. The Fed had signaled three interest rate steps in December, without giving a specific time frame. However, Goldman Sachs now expects four hikes. The Fed also faces tapering: capping the Fed’s balance sheet of nearly $9 trillion. The danger many see: The Fed could hit the brakes too hard and trigger a recession. Which would then result in a new quantitative easing – and fresh liquidity for the financial market.

Trading in Tightening

Investor legend Paul Tudor Jones, in any case, judged on CNBC that investors should first say goodbye to tech stocks and crypto in a new monetary policy and seek “deep value” again: “The things that performed the best since March of 2020 are going to probably perform the worst in this tightening cycle. (…) Clearly, all the inflation trades of the pandemic area are going to be challenged right now,” judged Tudor Investment CIO.

New inflation data

Much, if not all, depends on price inflation. Inflation rose to 6.8 percent in November – the highest since 1982 – and the new Consumer Price Index comes out today – analysts expect year-over-year inflation to be 7.1 percent. If inflation is much higher than that, fears about quick, tough moves by the Fed will once again rage on the trading floor. But if it is moderate, investors will assume that the money supply will be throttled rather gently and slowly – and they will celebrate. As of 2:30 p.m., we’ll be smarter. Bernstein Bank wishes you good luck – keep an eye on the realtime news!

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.

11.01.2022 – The week has not really started optimally for bulls. Fears of a tightening of the Federal Reserve continue to circulate. And also the US policy plays a role. Let’s let a bear provide a possible explanation to what’s happening.

Yield of the Treasuries rises

On Monday, the yield on 10-year U.S. Treasury bonds moved to a two-year high of 1.8064 percent. The S&P 500 dipped to the 50-day line, which was last at 4,677 points. Before the new Consumer Price Index on Wednesday, many investors held back for now. We had already suspected that the interest rate fears continue to hold the market in its grip. Not only we: Over the weekend, Eric Peters, chief investment officer at hedge fund One River Asset Management, delivered a gloomy outlook.

Fear of overreaction

Peters fears the Fed is overreacting – after all, the central bank spent a decade fighting deflation. Accordingly, he said, it lacks experience with inflation. “Financialization of the economy is so extreme that it doesn’t take many rate hikes to have a meaningful effect on the economic system anymore.” The hedge fund manager continued, “When you financialize your economy, and it is leveraged to your financial system as it is in the US, then you don’t need much tightening to slow the economy.”

Strong vola ahead

In this regard, the One River Asset Management expert does not trust the Fed to manage expectations in the market: “When your economy becomes a casino, players in the casino have outsized control over the economic system in that their forward expectations and bets start the tightening process before the actual rate hikes begin.”
All in all, the hedge fund expert sees black for this year: “This year will be messy, volatile, far sloppier than previous years. (…) First the market must adjust to the shift in the Fed’s stance, which will punish the most speculative corners of the financial system. (…) But that phase is well underway. The least profitable tech stocks excluding the FAANGs have been savaged. (…) This year, or at least this quarter, will be all about rotation, and beneath the averages there will be further carnage.”

Sector rotation

We think that such a sector rotation, in which only the strongest survive, is likely to take place above all in the high-tech indices. After all, the Nasdaq is home to many companies that are not yet making profits and are extremely sensitive to interest rate speculation. Apart from that, increased volatility will of course please traders. Unless they have gone long in e-currencies – Ether has lost more than 20 percent from its high in a few days. With higher interest rates, cryptos are just not needed as an inflation hedge anymore.

Looming political quake

For next year, Peters has even more fodder for the bears: “Then next year we will enter a political dynamic unlike anything we’ve seen in a 100yrs. (…) Now it is obvious that we are headed toward a catastrophic political collision. It’s so obvious but few people want to really admit it.” Note: If the Republicans take the majority in Congress in the November midterms, Sleepy Joe Biden is likely to face impeachment proceedings. Possible issues: venality by China; more Corona deaths than under Donald Trump; failure to withdraw troops from Afghanistan; incapacity due to senility; exploding violence in major cities governed by Dems due to “Defund the Police.” And with Congress having budget supremacy, America could be pretty much paralyzed politically next year. Our conclusion: we too think the two issues – Fed and Midterms – are two of the most important issues this year. Whether long or short – 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.

10.01.2022 – The Lira short rocket is likely to ignite its final stage shortly. One blog sees USD/TRY crashing to over 100 as the central bank runs out of foreign exchange to intervene.

ZeroHedge recently commented, “The only question is when will Turkey’s FX swaps stop working – that’s when the lira will reprice from 13 to 100+ in a millisecond.” According to the financial blog, Turkey’s gross FX reserves do stand at $110.9 billion. However, net reserves – the stock minus liabilities – now stand at only $8.6 billion. This means that Ankara has only two to three weeks left before it loses control of the lira.

Mega-inflation and low interest rates

There is no reason for a turnaround. In December, year-on-year inflation jumped to 36.08 percent – the highest level in about two decades. Even the most pessimistic analysts had expected only 27 percent. Producer prices even increased by 79.89 percent in December. No matter -the Turkish central bank lowered under pressure of the Turkish president Recep Tayyip Erdogan the key interest rate. It is now at 14 percent, so investors fled the currency. The USD/TRY rushed down to about 18.

The state takes over currency losses

Ergo, Ankara intervened shortly before Christmas by offering deposit accounts with foreign currency as compensation for lira losses. The government thus assured companies that it would assume exchange rate risks. This is likely to place an enormous burden on the state budget. Target achieved: The lira fizzled upward to $10.6. A painful short squeeze, in other words.

Voodoo monetary policy

Goldman Sachs commented that the deposit guarantee does not address the actual fundamental reasons for the currency’s crash. We add: The reason is Erdoganomics – the voodoo belief that low interest rates support a currency. In addition, a bloated state budget that finances military escapades, for example, via the printing press. Then there is the corona dent in tourism as a foreign exchange earner.

Left pocket, right pocket

At the end of 2021, the Turkish central bank then caused confusion again: It allegedly posted a daily profit of $10 billion. According to Bloomberg, on Dec. 30 the institution had still reported a loss of around 70 billion liras – or about $5.2 billion. A day later, the balance sheet stood at 60 billion in the black. There was no explanation for the sleight of hand. The action was discovered by two opposition politicians, Ibrahim Turhan and Kerim Rota. They assume that the central bank simply sold dollars to the Ministry of Finance. We suspect that an injection of money from China or Russia could also be behind the unexpected turn of events.

Thou shalt not sell lira

Either way, it doesn’t inspire confidence. In the meantime, however, we have returned to around 14. Now, the Turkish authorities now announced that they want to keep a register of everyone who buys large amounts of foreign currency. In other words, selling Turkish lira. According to Bloomberg, the central bank has instructed commercial banks to report all major transactions.
Our conclusion: unfortunately, there is much to suggest that the Turkish lira will become a worthless monopoly. But perhaps this skeptical outlook is just the typical contra-indicator for the turnaround. So if you believe that Erdogan is changing course and that the lira is now gaining, get in now. 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.

07.01.2022 – Now they’re pondering again: stock market players are analyzing the Federal Reserve’s minutes. Many assume that the “runoff” – i.e. the normalization of the Fed’s balance sheet through the discontinuation of quantitative easing – could proceed more quickly than previously expected.

Higher interest rates sooner

The consensus in the market is that the minutes turned out to be quite hawkish. The December minutes, now released, illustrate a growing willingness within the Fed for a faster path to higher rates and shrinking the central bank’s balance sheet. The Fed warned of a “potentially faster pace of policy rate normalization.” JP Morgan commented that the Fed sees rate hikes “sooner or at a faster pace” than previously expected.

Faster Tightening

The market also interpreted a fact about balance sheet normalization into the minutes: tightening could begin within nine months. Many had assumed two years after the first rate hike. Moreover, according to the Fed, the U.S. labor market is likely to reach full employment sooner than expected, which would remove one argument for the support provided by the central bank’s flood of money. Otherwise, there is a risk of inflation overshooting.

High-tech and bonds in sell-off

So now interest rate fears and worries about higher financing costs are circulating again. Ergo, growth stocks lost, the Nasdaq Composite slid more than 3 percent yesterday. That’s because higher interest rates are bad news for high-tech stocks, since many newcomers finance themselves through credit; and since companies with no profits usually use the discounted cash flow model for valuation, which incorporates the interest rate. Bitcoin as an inflation hedge dipped. Bonds were also less in demand – those expecting higher interest rates don’t want to lock in long-term at mini-yields. As a result, yields on the ten-year moved up to 1.75 percent.

Not everyone is shocked

The shock is quite astonishing, after all, the meeting of the Federal Open Market Committee was already three weeks ago – and in the meantime, some Fed officials have publicly expressed their views along these lines.
But stoics have also spoken out. Julien Lafargue, Chief Market Strategist at Barclays, commented: “We believe any correction should be relatively short-lived as central banks will be keen to avoid excess volatility. (…) 2022 is likely to be a more challenging year for equity markets as well as investors’ nerves.” Sounds like he just read our short analysis on the VIX trade.
Our conclusion: Fed tightening will be the investment theme this year. Wild swings in both directions can be expected at any time. A paradise for traders. But: don’t trade around the Fed. Keep an eye on real-time news and study our calendar. Whether long or short – Bernstein Bank wishes you successful trades and investments!

Important Notes on This Publication:

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

05.01.2022 – Now it has twitched again briefly: After the recent setback of the Nasdaq, the VIX has picked up a bit. But the Volatility Index is still closer to the all-time lows than to the highs. Traders and investors should take a closer look.

Disruptive fire from the bond market

After the small Christmas rally, everything seemed fine again for the bulls: Wall Street rallied, new records were set in the S&P 500, which also declined only slightly yesterday. High-tech stocks, on the other hand, suffered major losses. The setback was triggered by a rise in the yield on 30-year U.S. bonds to 2.1 percent – at the beginning of December, we had seen 1.68. The move yesterday and the day before was a sign of a recovery. The move yesterday and the day before was the strongest gain since the turbulent March of last year. Bond investors are particularly risk averse – if they are going into bonds, something seems to be brewing on the interest rate front and in the overall market.

Against the tide

The VIX fear indicator is trading in the 17-point region, just a shot off its 24-month low of 15.01. At the end of 2017, it had been at an all-time low of 9.14. It can hardly go any lower. The VIX is calculated by the Chicago Board Options Exchange (CBOE) the ratio of call to put options.
In other words, when the good mood is raging, it’s time to swim against the tide. Because when the panic indicator shoots up – we had a high of 82.69 points during the Corona crisis – then it’s possible to cash in. Let’s let two bears have their say and give us an indication of what could be in store for us.

The grizzly among the bears

Michael Wilson of Morgan Stanley, for example, is considered the mega-bear on Wall Street. A grizzly, so to speak. With his negative scenario of 4,000 points for the S&P 500 at the end of 2021, he was way off the mark. At least he correctly predicted the rotation into new stocks and his bank’s Fresh Money Buy List beat the S&P 500 by 300 basis points. Citing Omicron and the fact that the stock market meltup was carried by only a few stocks, Wilson expects a complete “valuation reset” in the stock market this spring. His advice: “Bottom line, when looking for the other side of the large cap defensive barbell, focus more on small/mid cap value rather than small/mid cap growth, particularly with the Fed and other central banks tightening policy.”

Perma-Bear

Investor Dennis Gartman is permanently bearish and generally believes the market is overvalued. Speaking to Bloomberg Radio recently, the Gartman Letter editor said he expects a slow, grinding stock market descent in 2022 as the Federal Reserve goes hawkish. He sees as many as four rate hikes by the Fed, which would have to respond to inflation; most analysts expect three. As a result, stocks could fall about 10 to 15 percent this year. Specifically, “The advent of a bear market will come when the Fed begins to tighten monetary policy, and that will be later this year. No question.” Unfortunately, Gartman has been quite wrong with his assessment over the past six months, which is why the University of Akron fund has been missing out on money, as he was the financial manager in charge of reducing exposure by a tenth. But he may be right this time. Our conclusion: if the VIX dips further in a carefree stock market, it might be worth buying the VIX as a protective put. If only to spare the nerves. The 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.

03.01.2021 – Now the predictions for 2022 are getting blatant: The Dutch Rabobank sees signs of a total system change. And it names ten scenarios, some of them extremely unusual, that could shake up the financial market. We don’t want to deprive you of this.

Hear, hear: “Outrageous Predictions 2022: Revolution” is what SaxoStrats calls its prediction for the coming year. The analysts visibly made an effort to illuminate even dark corners and make quite original suggestions. Rabobank’s conclusion: With culture wars raging all over the world, it is no longer a question of whether we will have a socio-economic revolution, but only when and how. Ten unbelievable events could cause turmoil in the financial market:

1. the plan to end fossil fuels gets a rain check. In other words, because of rising inflation and the threat of unrest, a policy reversal is underway that is now relying on fossil fuels again. The comment of the Bernstein bank to it: Quite possible – that would mean going long on oil. Germany is already the only country with green re-education fantasies. In the U.S., Build Back Better with strong eco-investments is on hold due to Senate opposition. France or the Netherlands are going nuclear.

2. faceplants on youth exodus: young people are turning away because Facebook’s plan to turn personal data into money is repugnant to them. We think: Possible scenario. But first we need an alternative. If the thesis does come true as believed: Short Facebook and the Nasdaq.

3 The US mid-term election brings constitutional crisis: Possibly a stalemate will arise in Congress, which will be paralyzed as a result. Bernstein Bank thinks: Congress passes the budget. If the stalemate occurs: Short overall market – Dow Jones, S&P 500. However, rather short – the stock market usually shakes off political disruptive factors quickly again.

US inflation reaches above 15% on wage-price spiral: Inflation could climb to heights not seen since the 1970s. Bernstein Bank opinion: Absolutely realistic assessment. Initially boost for equities due to flight to real assets and rising corporate profits. Bullish for gold, energy and cryptos. But if corporations can no longer pass on higher prices to consumers and unrest threatens, short for overall market.

5. EU Superfund for climate, energy and defense announced, to be funded by private pensions: equivalent of $3 trillion could be withdrawn from pension funds. Our interpretation: Absolutely possible – anything is possible for the EU. Positive for green stocks, but political fallout possible and overall burden on the market. Pensioners don’t like to be plundered.

6. women’s reddit army takes on the corporate patriarchy: a feminist attack on corporations that don’t take gender equality too seriously. Our comment: A footnote in the overall market, rather unimportant. Especially since many companies are already overreacting to gender and diversity issues.

7. India joins the Gulf Cooperation Council as a non-voting member: Global alliances could be thrown into disarray by a new de-globalization and rising energy prices. More pressure on Iran. Bernstein Bank commentary: could come to pass. Further strengthening of oil producers – a renewed factor for long oil.

8. Spotify disrupted due to NFT-based digital rights platform: artists could recoup revenue through blockchain technology. Our comment: irrelevant.

9. new hypersonic tech drives space race and new cold war: a new arms race looms. Bernstein Bank commentary: boost factor for defense stocks, rather than threat of war – the balance of terror held even in the Cold War.

10. medical breakthrough extends average life expectancy 25 years: The extended life would raise ethical questions and bring unexpected consequences for budget planning. Our 50 cents: Science fiction for now. If so, after Corona, another boost for the pharmaceutical sector.

That leaves our contribution to the thesis revolution: Maybe Rabobank is right. But on one point it didn’t mention: Corona. We wonder whether the skepticism in the population against the planned vaccination subscription and looming permanent boosters, as well as against the exclusion of the unvaccinated, is not growing. Finally soon also twice vaccinated are only unvaccinated lepers. We are therefore curious whether the new year will be truly revolutionary – and wish good luck with 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.

31.12.2021 – The Russian bear is extending its claws – and that could send the financial market into a panic. For us, an invasion of Ukraine by Russia is the biggest geopolitical risk in the coming year.

Russian saber rattling

In the days leading up to Christmas, NATO warnings that Russia had massed some 100,000 troops on its border with Ukraine increased. Russian President Vladimir Putin rattled his saber. True, Moscow now symbolically withdrew 10,000 troops. But the Russian Federation still has a score to settle: Russians see the Ukrainian brother nation’s departure as a betrayal. Moscow rages that the West has broken its word and always extended NATO westward. True. But small states in Eastern Europe sought protection from a Russia that has never apologized for its Stalinist atrocities.

Appeasement in the West

No, an invasion of Ukraine would probably not trigger a major war. Because the oh so prudent elites in Germany and the rest of the West would first convene crisis teams, then differentiate and weigh things up, and finally declare themselves not responsible. And Russian natural gas is also an argument. U.S. President Joe Biden has already waved off the subject of war, and Italy’s head of government Mario Draghi has also publicly mused about the futility of armed intervention. Appeasement everywhere.

The shadow of famine genocide

Yes, the matter would nevertheless have significant consequences. England and America would probably reinforce troops in the Baltics and Poland and supply the Ukrainian army with weapons. Presumably, at first the ruble and also the stock exchange in Moscow would go down in a shock reaction.
But ultimately Moscow would cut off the Donetsk Basin from Ukraine, where an ethnic Russian majority lives. This would sow the seeds of the settlement policy from the 1930s, when the USSR kept its workers in the coal and ore regions well supplied with grain in exchange for plundering and starving millions of people in the agrarian part of Ukraine. The genocide called Holodomor was also intended to suppress Ukraine’s independence aspirations, which therefore fought with the Wehrmacht in World War II.

When, if not now?

We share the assessment of the Capitalist Exploits blog that the risk of invasion is underestimated in the market. We think: When, if not now, with a senile president in the U.S., should Moscow strike? The West’s likely response: an exclusion of Russia from the SWIFT payment system for Russian banks. “Capitalist Exploits” quoted New Jersey Democrat Bob Menendez, Senate Foreign Relations Chairman: “The Russian banking sector would be wiped out. (….) Sovereign debt would be blocked. Russia would be removed from the SWIFT payment system … What is being discussed is at the maximum end of that spectrum, or as I have called it, the mother of all sanctions.” In addition, there could be sanctions against the Nordstream gas pipeline.

SWIFT and Cyber War

But would SWIFT really be a real sanction? Russia has no debt at all. And besides, the country has developed an alternative payment system: True, only 400 Russian banks and companies and eight foreign banks are involved in the System for Transfer of Financial Messages (SPFS). But there could quickly be more. Especially as ties with China grow closer and India has signaled interest.
Ultimately, SWIFT sanctions could become an unpleasant boomerang for the West. Presumably, Russia would unleash a cyber war. We add: China and North Korea would happily participate in this – and ultimately hit the entire Western economy hard. Here’s how the World Economic Forum named the possible fallout of a coordinated hacker attack on the West: closure of banks for several days, crash of online banking. Debt moratoriums, i.e., cessation of loan repayments. Disconnection of the world from major currencies such as the dollar, pound and euro. Imagine the crash the stock markets would take.

These are the antidotes

“Capitalist Exploits” went on to say that people could become restless, martial law threatened. Add to that the rationing of food. The antidotes: building up reserves of food and energy. Banking in Russia. Buying hard assets. Copper, for example. Base metals. Offshore oil and gas, especially from Russia. Rare earths. Gold. Coal. Also logistics. Eastern Europe: capital is likely to flee to the Polish and Russian stock markets. The U.S. dollar will become a safe haven in the long run, despite everything. We are curious to see how this will develop. Bernstein Bank advises all traders to keep an eye on the topic in the real-time news.

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.

29.12.2021 – A fabulous stock market year is drawing to a close. As always, we look ahead. And we let Goldman Sachs, a mega bull, have its say. We also hand over the microphone to the bears Phoenix Capital Research.

Goldman sees rising profits

Goldman Sachs was right on target this year, with a target of 4,700 for the S&P 500, and the index even managed a record high just above that. A few weeks ago, Chief Equity Strategist David Kostin saw the target for the composite index at 5,100 by the end of 2022. To be sure, he said, valuations are already quite stretched. But that will be offset by growing corporate profits, he said. We comment: So, corporations are managing to pass on inflation to end users.
For example, according to Goldman Sachs, earnings per share (EPS) for the S&P 500 are expected to climb 8 percent to $226 in 2022. And in 2023, rise 4 percent to $236. The S&P 500’s valuation will remain at 21.6 times at year-end 2022, he said. Otherwise, the Fed will start raising interest rates in July, he said.

TINA

The most important factor for the bull market to continue: there is no attractive alternative to equities, according to Goldman Sachs. We add: There is no alternative (TINA) specifically means: cash means expropriation, government bonds offer measly returns, gold and silver are not advancing, cryptos are riding a roller coaster.
The gold men’s advice: stock up on virus- and inflation-proof cyclicals; avoid companies with high labor costs; buy high-margin stocks; stay away from unprofitable growth stocks. Overweight Technology, Financials, Health Care.

Always the threat of a bubble

Phoenix Capital Research, on the other hand, warned that the bubble will burst – and that event could make the 2008 financial crisis seem like a picnic. There are some warning signs of this, he said: options volume, as a sign of speculation, is far higher than during the tech bubble. The billion-dollar market for cryptocurrencies has grown rapidly in the meantime, he said. A giant like Tesla is behaving like a penny stock, fluctuating sometimes by 10 percent a day. Digital junk like non-fungible tokens fetch significant prices. Fun stocks sometimes achieved triple-digit gains per day. Former President Donald Trump’s Special Purpose Acquisition Company (SPAC), for example, is already worth $5 billion – even though the business is not even up and running yet.
Moreover, the Federal Reserve is doing nothing about this bubble. Thus, according to Phoenix Capital Research, interest rates are likely to remain at zero until mid-2022. By then, another $90 billion in quantitative easing would be pumped into the market.
Our conclusion from all this is that perhaps both are right. First we will see a new run on stocks and co. because there are actually few alternatives to investing and trading if you don’t want to be expropriated. And then some major event comes along and the exuberant euphoria turns into panic. But then you are also on the right side with shorts. Bernstein Bank wishes you a successful stock market year 2022!

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.