• Clifford Bennett, Chief Economist | World’s most accurate currency forecaster at ACY


• 05.04.2022 03:45 pm
#stocks

There is no doubting the positive tone of Monday trading in New York.

To be fair, it was largely a lift from one event, that of Elon Musk buying 9% of Twitter.

Nevertheless, the market continued to look away from economic reality, US Factory Orders fell 0.5%, and simply chose to buy for buyings sake. This appears the dominant trend for the moment. It looks like the elastic band will continue to stretch away from Main Street reality, as Wall Streeters stay high in their ivory towers seeing only blue sky.

Over in Europe, one market continues to buck the trend of a weakening, at least consolidating, US dollar.

The Euro is pointing south in an ominous way and I am still forecasting a fall through parity to .9700, as the Ukraine Inflation/Recession gathers force. Many investors may well be making an error in assuming markets have looked past and already priced in this gloomy prospect for Europe. In fact, markets have only nibbled at the idea of pricing in such an event. There has undoubtedly been ECB intervention in the support of the Euro. As forecast they will not however seek to hold a line, only provide liquidity in the initial response to the conflict. It is now likely we will see ECB support begin to crumble way leaving the Euro completely exposed to the full force of rampant inflation, an ECB that cannot hike, and an ever deepening recession.

European inflation like the USA is already skyrocketing and will exceed 10% in coming months. Economic growth will contract significantly. Succumbing to the three forces of rampant inflation eating away consumer and business expenditure choice, consumer caution and fear over the on-going conflict likely to last the rest of this year, and the clear and present danger of actual energy shortages let alone their ever higher prices. Oil prices look to have already absorbed the US strategic reserves release and are again moving higher. I still expect $150 and $180 oil in the not too distant future.

Investors should make the most of the sentiment and meme moments of Elon Musk’s buying of Twitter, for all the economic fundamental writing is on the wall. People may shuffle the sentiment furniture but the writing is on the wall.

In the meantime, selling the Euro against most major currencies, especially the US and Australian dollars, could be the trade of the moment.

Clifford Bennett
ACY Securities Chief Economist.

The view expressed within this document are solely that of Clifford Bennett’s and do not represent the views of ACY Securities.

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