Russian news rules the markets
Abraham George Market Musings
Just the day before yesterday, the markets were in a place of constant weeping, gnashing of teeth, and wailing but that all changed yesterday and hopes of moving to cloud nine started are beginning to resurface.
Have we surpassed the point of maximum pain? I'm not very sure yet. But reading between the lines of what is being reported in the media and from some expert comments from experienced and knowledgeable people, there remains hope that the markets may have seen the worst.
It is still not very conclusive. As I always like to say, it is never fully black nor white but we are rewarded (or punished) for the decisions that we make when it is in different shades of grey.
The political situation surrounding Russia, Ukraine and the western allies rule the markets at the moment. While inflation, bottlenecks in the supply chain and markets re-emerging from the pandemic are all important, they have all taken a back seat now.
Russia is a gigantic country with 11 time zones. Ukraine is surrounded at three fronts with the Russian army totaling about 150,000. The news yesterday was that some of the troops were moving back to their bases after some drills at the border. The movement of these troops can take weeks. Combined with Russia’s comments that they are still willing to engage in diplomatic discussions is what gave the markets the impetus to change direction.
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We still haven’t heard anything from the Russian leader. The audio still has to match the video. As for the Russian President, he must still be contemplating if the juice is worth the squeeze. So, I think the next few days should give us more colour on what could actually transpire.
Meanwhile, the January 2022 producer prices were almost 10% higher than the year before. When I was active in the markets, this was not a report anyone paid attention to. But now, this follows last week’s report which had shown a 7.5% year-over-year rise in consumer prices. Today, we also have the China PPI release. What I’m thinking loudly is this: are we at the point of peak inflation or is there more to it? The market is very divided on inflation and so are the Fed officials. If it is going to remain sticky, the Fed officials will have to do some serious recalibration. My hunch is that the inflation fear will peter out soon and it won’t be as worse as what the market is currently making it out to be.
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Abraham George is a seasoned investment manager with more than 40 years of experience in trading & investment and multi-billion dollar portfolio management spanning diverse environments like banks (HSBC, ADCB), sovereign wealth fund (ADIA), a royal family office and a hedge fund. Currently, he is a co-founder of a new hedge fund where foreign citizens can invest in Indian growth stocks like Tanla operating in hyper-growth markets like CPaaS.