• Clifford Bennett, Chief Economist at ACY Securities


• 23.02.2022 11:00 am
#stocks

In case you didn't realise it, that is the stock market right now.

Russia continues to win. I know that is painful to many people, but that is the reality. What is even more painful is that the brief rally stocks had going into New York, was based on entirely mistaken concepts along the lines of that is all Russia will do and US/European sanctions will stop them there. I mean. Really?

As highlighted yesterday, as more and more Ukrainian and Russian forces begin to face off against each other the build up along the entire Russian-NATO front will reach fever pitch.

The US has already sent more troops and F35s to NATO areas alongside Russia.

I do think Russia will continue to push further into Ukraine if the West continues to push NATO membership. And, if anything, the sanctions so far imposed, in proportion to the extent of Ukraine taken, which is rather laughable, have only furthered encouraged Russia to continue to move forward.

They see such sanctions as the price to pay to take Ukraine.

I do not think the conflict will spread to actual NATO nations. It will be the case that this is however an increasing risk awareness that markets will take up.

Germany has stopped the go ahead of Norstream 2. This is exactly what I have been talking about when I was saying sanctions on Russia will also slow the EU economy. Adding further inflationary pressures at the same time.

On Markets, it is finally in the official press that the US stock market is having a correction. We called that in the first week at the January 3rd high when I said it would not be the first time a major market has topped for the year in the first week of trading.

Everyone wanted to buy and everyone was wrong. It is always when markets are extremely wrong that the biggest opportunities present themselves. We hope you have enjoyed the ride down.

Stocks are currently crashing, have been for some time as they are buffeted by slowing economic activity, supply chain roller-coasters (subsiding but still there) extreme inflation with more to come, a definite outlook of aggressive rate hikes to come, extremely high valuations levels making the market ever more vulnerable, and a continuation of our alone forecast of slowing manufacturing activity akin to what we saw pre-1929.

Ukraine is the catalyst of the moment to be sure and adds a whole new dimension, but stocks were going down anyway and this is what the great majority of market participants still do not understand. This is what affords us the advantage and on-going opportunity.

My view has not changed for many months: Sell Stocks. Buy US dollar. Sell Euro and the Australian dollar certainly. Buy Gold. Oil, I was aggressively bullish, but suggest some caution, still long, as a lot is already priced in there.

There are also signs that we have seen the absolute top for the Tech sector and the Crypto space. For Crypto, well they may never get back to where they just were.

The world remains full of opportunity, not out of war but out of reading the real fundamental picture pre Ukraine. The situation in Ukraine remains headed for all out war. Stock and investment portfolio protection has never been more important.

US Richmond Fed Manufacturing Activity is plummeting.

Yesterday's Power Update.

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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