May 28, 2023

markets report 21/3/23

Sports Tuesday everyone! Issue 263

American stock indices rose yesterday, but the growth is small and hides behind still a disturbing mood.Firstly, a very moderate growth of the indices was accompanied by volumes falling to the average level. Secondly, there was an interesting moment, the usually active techs in the form of NASDAQ showed the smallest growth yesterday, but the calm DOW Jones, on the contrary, grew the most. This may indicate that participants at the moment clearly prefer reliable very large companies and value stocks over risky technology sector and growth stocks. Let me remind you that among the techs, staff reductions and rather big ones continue. This is what companies do when they have at least some problems themselves, and at the most they are preparing for a recession in the economy.

That is, it turns out that on the eve of the meetingFed investors choose stability and do more to lose than to risk. Although the VIX fear index has rolled back lately, it remains at a fairly high level and seems to have just taken a break before a new surge of volatility, which I think cannot be avoided after the announcement of a new rate tomorrow.

The banking sector is still in an alarming state andthis must be taken into account. The big banks are hovering a bit or just hovering around their lows, apparently in anticipation of what the authorities will do next or who next will announce the end of their activities in the US. Yes, and in general on the planet. This has a positive effect only on those banks that redeem the drowned. The NYCB will pull off such a thing and its shares have grown by 31% yesterday. The big banks will now be enriching themselves at the expense of the dying small ones, but this is unlikely to have a good effect on the system in the medium term, no matter how they themselves need help. And the deplorable FRC, despite the support provided, sank another 47% yesterday, which means that the market does not yet believe that the bank will be saved.

The same situation with the European CS, which is likehow he agreed to buy out UBS and thereby save a bank with a rather long history. BUT the market does not believe all this and CS shares, which cost $2 on Friday, were already trading under $1 yesterday. That is, they lost 53%, despite the fact that they are already at the deepest historical bottom. Thanks to the half-dead FRC and CS for another important reminder, catching falling knives is very dangerous and painful. And the second point is that what has fallen strongly may fall even lower. I know young traders who managed to see off dying companies on their last journey with shorts, earning good and bold money. Sounds harsh, but this is the stock market, not for the faint of heart.

Some analysts rightly callpay attention to the bond market, because there you can see what kind of betrayal many are sitting on and that a quite serious systemic crisis caused by the policy of high interest rates is approaching us. Treasury yields have dipped significantly in recent years and continue to fall. BUT here it is important that the short 2-year yield falls much stronger than the far 10-year one.

Roughly speaking, long-range returns win backlong-term problems with inflation, but the short wins back the current problems. And she says that people (and these are most likely banks) are massively purchased with short treasures in order to obviously sit out turbulent times in them. That is, in fact, there is a very powerful RISK OFF on the market. And the slightly growing stocks, and the briskly growing Bitcoin, are simply happily winning back the liquidity flooded into the market. Let me remind you that the QT program has actually been terminated, and here the Fed has almost made a U-turn, having stopped withdrawing liquidity from the market and pouring 300 billion into it. And when money is poured into the market, risky assets usually win back this by rising quotes. It's the law of the jungle that almost always works. But the question is how much is enough. Because more and more participants begin to believe that the reduction of the interest rate is not far off, and moreover, a sharp one. And as the history of 2000 and 2008 has shown, when rates begin to drop sharply, after that the market still sags by 20% or even 40%. Because the rate is starting to be lowered to help the economy cope with the systemic crisis that was caused by the high interest rate. That's such a cool science - economics.

But I will dilute all this with a positive, first of all, in the near futureFed meeting can greatly improve everything and flood the market with liquidity. Secondly, no one knows exactly when the happy reversal in politics will take place. It can be fucked up both now and in September or even next March. One thing is clear, the longer the problem is put off, the more blood it will cost to solve it in the future.

Oh well, about American sadness, where is realeverything is cool and positive, so it is on the Russian stock market, here the SBER continues to shove up robustly and closes at the highs of the day, this indicates the presence of a strong momentum in the moment. Also, the largest bank in the country pulled the entire market with it, because the surprisingly large dividends, the lion's share of which will be received by the state, made it clear to the market that most likely the rest of the state offices SIBN, GAZP, ROSN and the rest can also pay generous dividends. IRAO looked good against the general background, adding 5% on the recommendation to pay dividends with an 8% yield. But VTBR flew the steepest of all, which rose sharply by 14%, in the words of Kostin about record profits. The market naturally believed, because our banks no longer issue financial statements and there is nowhere to check it “] But also, after the failure to pay divas last year, the market may hope for payment this year. I'm happy for VTB shareholders because the paper has been hanging out in a completely rotten sideways trend lately, but here it's such a joy!

While the Russian market looks good, its isolation from world problems is especially pleasing. While we are on our own and growth may continue, unless of course there is a global world crisis.

I wish you all a cheerful sports Tuesday! By the way, thank you very much for the donations, it's very nice! And in general, thank you for being and reading, so it's not all in vain! Have a nice day and good deals! Peace Yo everyone!