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The Russia-Ukraine War will Dominate Markets this Week

The Russia-Ukraine War will Dominate Markets this Week

After high Inflation in US and Europe, the Covid-19 pandemic outbreak, a new event like war between two major countries affected the markets. War between Ukraine and Russia pushed this morning Gold over 2000$, Oil to 124$, Soybeans 1686$ and Corn to 775$. During war times precious metals, Oil and Grains perform well instead of risk assets like stocks.

Gold pop UP!US OIL POP UP

High level of sanctions from the Western Economies will destroy the Russian economy in the medium term. The Putin regime will fall in the near future because you can't win a war completely isolated from western world and you can't govern with terror and mass-media censorship.

According to the last Russian laws, you can get 15 years in jail if you transmit information from the battlefield that is not what the regime wants. All social media are closed, also internet websites like BBC, CNN, The Guardian etc. If the Putin regime it's not quickly removed, the Russian people will live like in the North Korea.

Also, some important brands like Toyota, Ford, BMW, Mercedes, VW, Oracle, SAP, Mazda, Nike, PayPal, Apple, IBM, DELL, Mitsubishi have closed the doors to the Putin regime. The Russian currency is moving down by over 30%, and the Moscow stock market is closed for three days in a row.

With the US & EU already facing the highest inflation in over four decades, triggered by the Covid lockdowns and restrictions, and the February CPI release this week anticipated to show an escalation during the previous month, the real possibility of an economic recession is even larger.

Therefore, the Federal Reserve's upcoming policy meeting on Mar. 15-16, will start a new interest rate hike cycle and it's not advisable to be exposed on the growth stocks. We still own high dividend stocks in the energy and finance sectors and also, we are keeping our Gold & Silver positions. We anticipate further weaknesses in stocks this month.

The United States and European allies are exploring banning imports of Russian oil, Blinken said on Sunday, and the White House coordinated with key Congressional committees moving forward with their own ban.

"A boycott would put enormous pressure on oil and gas supply that has already felt the impact of increasing demand. Prices are likely to rise in the short term, with a move toward $150 a barrel not out of the question Such a move will put further pressure on global economies, pushing inflation higher, leaving central banks debating how quickly rate hikes should be implemented." according to some analysts from CMC Markets.

"The war has clearly increased the risk of a stagflation scenario for the euro zone, where you will have a stagnating economy and much higher inflation on the back of high energy prices," said Carsten Brzeski, global head of macro at ING.

We stand with the Ukrainian people that fight for their freedom and we want to help mothers with children that are refugees. Right now, we are facing a real drama on the Ukrainian border as the refugee and their children are staying over three nights on -15°C without food and water.

It's estimated that there will be over 10 million refugees this year, if the conflict does not stop soon. 

ukrainian refugees

If you want to help refugees, you can donate on these links:

https://www.unicef.org.uk/donate/donate-now-to-protect-children-in-ukraine/ 

https://donation.dec.org.uk/ukraine-humanitarian-appeal

https://donate.unrefugees.org.uk/ukraine-emergency/~my-donation

https://donate.redcross.org.uk/appeal/ukraine-crisis-appeal

https://www.icrc.org/en/where-we-work/europe-central-asia/ukraine

https://www.savethechildren.org.uk/

https://donate.careinternational.org.uk/page/100263/donate/1?ea.tracking.id=e75_orgsocial

https://www.peopleinneed.net/

https://msf.org.uk/

https://donate.unhcr.org/int/en/ukraine-emergency

You can help Ukraine Army here:

https://savelife.in.ua/donate/        

https://www.portmone.com.ua/r3/uk/terminal/index/index/id/118103/

Слава Україні! (Slava Ukraini!)

Glory to Ukraine!

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Optimism didn't last on Markets after China lower Rates

Optimism didn't last on Markets after China lower Rates

SPX gave back the gains at the end of the day, because investors lost conviction that an early rally had legs. Risk-On sentiment didn't last after China decreased rates. Fears of inflation and higher interest rates in accordance with Geo-Political conflict between Ukraine & Russia have sent markets in red at end of the session.

Concern that the Federal Reserve will aggressively move to raise rates this year is a much more powerful catalyst than Chinese bank intervention and stocks Earnings. Investors have been concerned about rising rates because they raise borrowing costs and could dent global growth prospects and douse the earnings outlook for companies.

Analysts at ING said geopolitical risks, notably the possibility of Russia invading Ukraine, could continue to add to pressure on rising rates concerns.

Gold & Silver touched new highs lifted by worries surrounding inflation and Russia-Ukraine tensions. Gold 1,842 & Silver 24.63 gains were unexpected in the short term when bonds are up and Interest rates are expected to grow but geopolitical context is also an important catalyst.

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Markets Expectations for 2022 regarding Stocks, Gold, Oil and Commodities

Markets Expectations for 2022 regarding Stocks, Gold, Oil and Commodities

As we started a new year 2022, we want to present you our conclusions on markets and an analysis of our managed portfolio. In this article, we will analyse four major assets: Stocks, Gold, Oil and Commodities.

After stellar gains registered in 2021, in 2022 markets are expected to grow at a moderate peace, due to the rising risks.

We are bullish on Gold and Silver, and we are also confident on a future increasing in agricultural commodities, as we also presented in our article: https://topfxinvest.com/blog/we-anticipate-the-food-crisis-in-2022 

Now let’s take a look on some factors that can influence stock markets in 2022:

Bullish Factors:

  • The domestic economy is growing
  • Consumer spending overall is strong
  • Employment is expanding, and the unemployment rate fell to 4.1% from 4.2%.
  • Corporate earnings are growing by 27% (Apple it's $3 trillion company & Tesla deliveries grow by 87%)
  • Covid-19 Pandemic new variant Omicron is decreases in death rates

Bearish Factors:

  • Rising interest rates: FED official announced this week that they see this year three, instead of two interest rates increase
  • Some stocks are extremely overvalued, like FTNT (over 100%: yesterday we closed our position on FTNT) or MRNA. Also, almost 100 stocks from S&P500 index are up over 50%, which is too much in our opinion. If US interest rate will hit 5%, stocks will go down badly, similar to the 1987 crisis.
  • Continuing inflationary pressures because of transportations issues. We already discussed this topic in our article Shipping Congestions and higher prices will continue until ends of 2022 according to Morgan Stanley
  • Global tensions between Russia and US on Ukraine / Kazakhstan, also China and US on Taiwan, which are possible to extend into some major conflicts.
  • Covid-19 Omicron it's still here, and we cannot anticipate the implications of other virus mutations. If we have other lockdowns because of new pandemic outbreaks, stocks will be badly hit.

Other opinions regarding stocks:

JPMorgan Kolanovic says to buy the dip:

“Higher bond yields should not be disruptive for equities, but rather support our call for a growth to value rotation. […] We stay positive on equities and expect Omicron will ultimately prove a positive for risk assets, as this milder but more transmissible variant speeds the transition from pandemic to endemic with a lower human toll. As this wave fades, it will likely mark the end of the pandemic Omicron’s lower severity and high transmissibility crowds out more severe variants and leads to broad natural immunity”.

On congested supply lines: “signs of supply constraints potentially passing their worst point”

BlackRock's largest fund asset has an optimistic view, but they raise concerns over China Covid19 policy: 

“The Fed has signalled three rate rises this year – more than we expected. Markets seem primed to equate higher rates as being negative for equities. We’ve seen this before and don’t agree. What really matters is that the Fed has kept signalling a low sum total of rate hikes, and that didn’t change last week. This historically muted response to inflation should keep real policy rates low, in our view, supporting equities.” 

“And not all spikes in long term yields are the same. Last week’s jump in U.S. Treasury yields was about the Fed signalling a readiness to start shrinking its balance sheet. This could result in a return of the term premium that investors typically demand for the risk of holding long-term bonds. This is not necessarily negative for risk assets as it can reflect an investor preference for equities over government bonds.”

Regarding China slows growth rate: “The key question is how China’s zero-COVID policy will stand up against Omicron. The policy so far has proven effective and enjoyed popular support, but has left China with almost no natural immunity. We expect the country to maintain the policy – at least optically – in this politically important year. This raises the spectre of more restrictions on activity, from targeted measures that keep the economy humming (Shanghai) to full-scale lockdowns (Xi’an). As a result, we believe downside risks to China’s growth have risen, even as Beijing appears bent on achieving its growth target this year by loosening policy.”

We think it's reasonable for Gold to push a higher price to 2500 after a huge stimulus amount, but it will happen only after the FED finishes raising the interest rates. Oil will slow down only after the inflation will also slow down, probably in the second part of the year according to Citi Bank Forecast 

We added to our portfolio some agricultural commodities and precious metals (Gold and Silver). and we sold some positions like: Tesla, Fortinet, Shopify, DocuSIgn, Disney, TradeDesk. In 2022 we plan to add more dividend stocks because we have a more neutral view on this year’s growth.

Further, I'm not a big fan of Crypto currencies. 40K for Bitcoin is a good price, but if it goes further under 30K, it's a good to buy and hold bet.

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Do you bet on Gold & Silver for the next years? 

Do you bet on Gold & Silver for the next years? 

We have taken a Gold & Silver Position two weeks ago, at 1.710, and respectively 22.4 because we consider that Gold & Silver are the best bet against inflation, to add it at a portfolio: https://www.tipranks.com/investors/907783/topfxinvest.

We placed our funds via ZSILUS & ZGLDUS from Switzerland (Cantobank) considering primarily the safety of the funds, but in the TIPRANKS platform we added AAAU ETF and SLV ETF, as the aforementioned funds were not available.

Why do we like Silver & Gold in the long run, from a Fundamental point of view?

  • Gold & Silver are growing with fast peace because of the inflation pressure, CPI m/m numbers are much higher than expected: 9% versus 6%.
  • More than 50% of Silver’s demand originates from the industrial use. Also, being a malleable metal, Silver is just as good as Gold for jewelry making. It is also a good conductor of electricity, and it is used extensively in the manufacture of electronic components.
  • The transition to clean energy is expected to drive physical demand for Silver in the coming years, particularly for using it for connections in electric vehicles and for components in solar panels.
  • Growing of the Fifth Generation (5G) Telecom Networks will also fuel the demand for Silver in the next years.
  • Mining companies are worst performing in the last decade because of poor investments in this area.

Why don’t we like Silver & Gold in the long run, from a Fundamental point of view?

  • Monthly manufacturing PMI, or Purchasing Managers’ Index figures from around the world are losing the momentum. We have some decline in summer (55.6 to 54) but it's still above 50, that means we are still in the expansion cycle. If trend will continue, it will drag lower especially on Silver, but Gold also. JP Morgan’s global PMI reading steadied at 54.1 in September, and we see some flat readings.
  • Speculation since June, that the Federal Reserve will roll back its generous monthly stimulus of up to $120 billion that it has provided to the US economy since March 2020. That speculation weighed on Gold and Silver prices in the earlier months. On the stimulus end, the FED announced last week it would conclude its asset purchases in mid 2022 by tapering $15 billion each month from the program over the next eight months. FED Chair Jerome Powell also assured markets that the central bank will be “patient” in executing the first post-pandemic rate hike, which will likely take place at the end of next year. Possibility of a rate hike is dragging lower Gold, but in the long run Gold will continue to grow because of the huge amount of dollars printing in the pandemic outbreak. We have recommended buying Gold from 1.32 two years ago. Gold will enter in the second wave of growth if it breaks the Flag Formation next months.

From the Technical point of view, Gold & Silver is breaking resistance this week and it's still a good moment to add them to the portfolio, for the next years. We consider that Gold will reach the 2500$-3000$ area. Gold is breaking from a Flag Formation and Silver is bouncing from Range area. Please consider the charts below:

 

Gold growth  Signal Buy

Gold Chart

Silver growth signal buy

Silver Chart

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Rebound in Platinum or Palladium, or it is just a fake move?!

Rebound in Platinum or Palladium, or it is just a fake move?!

Do we have the opportunity to buy Palladium and Platinum right now, since the price dropped over 22% from all time high?!?

Prices are very attractive if we look on the charts below, but Fundamental Analysis tells another story:

  • Palladium is used primarily as an emissions purifier for gasoline engines cars
  • Platinum is used in the same way for diesel cars    
  • Auto sector is continuing facing challenges due to micro-chip shortage
  • Electric cars & hybrid technology are on the wave

We, personally, don not like to take trades without a fundamental catalyst or in opposition to Fundamental Outlook. From a technical point of view, we have interest in this trade but just for a very short time (a few days trade duration).

It's wise to wait a recovery in car sales and, after that, just take this trade.

What is your opinion regarding rebounding in Platinum or Palladium, or it is only a fake move?!


Plladiun rebound trade

Plattinium rebound

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Société Generale see GOLD down next year to 1.75

Société Generale see GOLD down next year to 1.75
  • We still remain slightly supportive in the near-term as we expect monetary and fiscal policy to remain highly accommodative but our conviction levels are simply pinned to our expectation that ETF outflows do not continue and we have some moderate inflows by the end of the year.
  • With positive economic readings and in particular, positive jobs data market participants appear to be focused on the prospect of an earlier than anticipated interest rate hike. While real rates are still expected to be negative, any expectation that this could turn positive faster would really dampen investment flows.
  • Our base case scenario is for gold prices to average $1,750 on average in 2022 as investment flows drop further.
  • In the upside price scenario (which is the downside economic scenario), we forecast prices rising to $2,100/oz whereas the downside risk to prices (on the upside economic scenario) is limited and prices could fall to $1,600/oz.

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