Since the end of last year, I have noted the calmness in the markets. It is expressed both in low price volatility and in measured expert comments and discussions. Markets have deceptive predictability. And the market cyclicality is such that, getting used to the prevailing trends, we suddenly get a change of them. The growing direction is replaced by the falling one, low volatility – high.
And, I think, the stock exchange industry is at a new crossroads or turning point.
You can start with the dollar. It would seem that there are so many dollars issued that their price reduction is guaranteed. But the surplus money supply is absorbed by the stock market. As soon as the latter begins to demand more dollars to maintain the quotes than they are issued at the moment, the weakening changes to the strengthening. This is what we have seen since the beginning of January. I don’t think the strengthening is over.
So far, the advance of the dollar is the most obvious pulling down on gold and silver. Like a week ago, I believe that their anti-rally will continue.
And oil seems to be joining this negative trend. The chances of a fall in price are higher than a continuation of the upward movement or consolidation.
The emerging funnel is unlikely to leave the stock markets aside. Yields on US government bonds in January have already risen (for 10-year terms – from 0.9-0.95% per annum to 1.1-1.15%) and are likely to rise further. With a slight delay, the same dynamics is observed in Russian OFZs.
Shares in the US and in our country are still stable, but I would not consider this stability promising. Although I see more risks for the domestic market than for the American one.
The ruble, within the framework of the above logic, is capable of losing support. The USD / RUB pair presumably found the bottom of its last decline near 73 units. And now its expected values have shifted to 75 or higher. I strategically evaluate the ruble as a cheap currency, the risks of which weakening are already mainly in the quotes. Therefore, I do not expect significant losses for him, and I consider his possible correction more or less local.
For the rest, perhaps, I am being overly cautious. Perhaps monetary stimulus and the retreat of the coronavirus pandemic (global incidence is increasing, but at a slower pace) will give markets a new boost. However, in my opinion, for stocks and bonds, and for oil and precious metals, the situation today is still so good that even its preservation against the background of the global GDP falling by a couple of percent in a year is an extremely energy-intensive task.
The current state of markets is a side effect of the colossal efforts of many countries to rebuild their economies. Suppose the restoration will take place in the future. But I have little faith that it, as it was in the 4th quarter, will be accompanied by outstripping market dynamics.
As an applied action, we plan to open small hedging positions in the high yield PRObonds portfolios. Just to be on the safe side.
On the graphs:
o Dollar Index
o Brent oil
o Index of net prices of Russian government bonds RGBI
o S & P500 Index Futures
o RTS Index
o USD / RUB pair
Sources: profinance.ru, moex.com