The Ukraine War will negatively affect the global economy. Trade with Russia is not a big deal but will affect Europe, particularly Eastern Europe, quite a bit.
More importantly, War increases uncertainty. What will happen? Will Putin invade other Russian speaking places like parts of Poland? Will Article 5 of NATO be triggered and the US and West Europe have to go to war?
The race does not always go to the swift nor the fight to the strongest…but that is the way to bet, said Damon Runyon.
So I am betting the war will not expand.
But global economies are still going to nosedive. Germany's economy was already negative in the last quarter. This will put them in a recession. We will see other countries also dip into recession.
Corporate profits will nosedive also.
But raw material prices will continue to skyrocket as companies and countries stockpile critical commodities. Thus, inflation will get worse.
Wait, Courtney, I thought you said this was bullish for the stock market but this is all bad news.
Yes!
Bad news is good news for the stock market because global central banks will now stop the tightening regime that was in place in the US and other parts of the globe. Central banks have been super loose due to the Covid Crash and now they can keep their policy unchanged.
The Fed will not raise rates by 50 basis points any more. Maybe 25 but maybe none at all.
They will talk about heightened global geopolitical uncertainty in their minutes and press conference.
So the pressure is off the stock market for now.
That should lead to a bull move from now until the end of April.
The question is what sectors and stocks will perform the best from this change in central bank policy.
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Good trading,
Courtney Smith
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