Don't get me wrong, I'm still very bearish on the market but the losses in the last 3 days are big and the market usually rebound after such losses. I closed my short position on the Nasdaq. The market right now is discounting inflation, China lockdowns and Ukraine war.
The inflation is due to the commodities crisis and the only solution is to increase the global supply, not to restrict it ever more by banning more and more countries from international markets because otherwise you need to destroy demand to reach a new equilibrium at that lowered supply level and that will cause a global recession with collapsing stock markets worldwide. Nobody wants it.
The lockdown in China will probably end at the end of May no matter the number of cases. They are decreasing but that zero Covid policy is dumb because Omicron spread much faster than the original variant and China can't allow its economy to be in lockdown for many months. The residents of Shanghai are getting increasingly frustrated and are now openly protesting it…even for China locking people down for months it's too much.
And the war in Ukraine I think it's gonna last for many months. Putin has made it clear it now wants the Donbass and all the Southern part and that will take time because they aren't mobilizing anybody and aren't carpet bombing anything. If you want to run a surgically precision campaign by limiting civilian losses you need to be prepared for a long campaign. This will affect markets negatively because volatility will remain high.
I think we may have a short rally next week, but medium term the outlook remains negative because the biggest problem (supply led inflation) won't be resolved and there is no plan to fix it. FED don't set commodity prices so it won't resolve anything other than fixing the problem by destroying demand and so the economy.
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