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.
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