"Investors lose much more money on trying to foresee correction than on the correction themselves." - Peter Lynch.
While everyone was looking for the "points" of a panic after reducing markets due to the growth of inflation expectations, news was published about a new colossal package of support measures.
The package itself is not fully adopted, we will learn about this this week. Recently appreciation. And judging by how much and quickly push it, there should be no problems.
Will the USD index decrease?
The question is very interesting, because the situation is drastically different from the one that was a year ago.Last year, a huge amount of liquidity was simultaneously with an extremely low yield on bonds. What was obvious. The economy got up, what inflation can there be here? And with this uncertainty, the demand for bonds has grown highly, despite the low interest rate.
Subsequently, when the economy began to recover, the bonds began to grow in profitability, which is already beginning to attract investors' capital. And in recent months we have seen how the growth of bond yields greatly increased the attractiveness of the dollar (the USD index rose by 3% and has already risen above 92 points for the first time since November).
But now the situation is already different. Now the economy is at the recovery stage. We are waiting for data on inflation for February. In the meantime, only we look at the fact that the 10-year US bonds give profitability above 1.59% and continue to grow.
The demand for them is reduced as inflationary concerns grow. And new incentives in such large volumes can only strengthen these concerns, which will lead to another increase in profitability.
In this case, the market may not be strong optimism, which was last year, because it will be leveled by the same increasing yield.
But for the dollar it is a plus. Because the high yield on bonds unambiguously increases demand for him. Yet it is impossible to deny that the dollar is a global currency. And with a good profitability of bonds, he begins to attract investors.
So, in the EUR / USD pair, you can also wait for the decline in the schedule.
And what then will be with the ruble?
We are now observing a very interesting situation. Markets are reduced, and the ruble is strengthened.
For the ruble now there is a very positive time. Next, OPEC made a huge gift to everyone, deciding not to be prey. Yes, and S. Arabia prolongs voluntary reduction.
All this leads to the fact that the price of the Brent oil futures struck the mark of $ 70 and is already almost at the peaks of 2019. For the ruble, this is a very positive signal.
Reducing the dollar's course prevents naturally restoration of the dollar. But the euro rate begins to decline.
Yes, and the RGBI chart (price schedule for Russian bonds) showed growth since the beginning of March. While, of course, speak early, but it can be a positive signal. As the global economy restores, the demand for risky assets, including ruble papers, can again begin growing.
It turns out, in the near future you can wait for the strengthening of the ruble.
What will happen to stock markets?
As I wrote a little higher, it's hard to say unequivocally. Yet I do not see the future I do not see the future. When I close my eyes, I see only darkness.But here are the signals from the restoration of the economy:
- US housing market index. In February, I showed the value in 84 (the forecast was 83). Such a high value indicates a positive attitude in the housing market;
- housing price index also remains high, which indicates price increases;
- business activity indices also showed growth;
- And also continues to decline the level of unemployment in the United States.
All this indicates the restoration of the economy, which means that this time really the distribution of presented money will not be already like that year. Some of the money will definitely go to the real economy, which will help disperse prices.
I do not think that there will be a strong growth of the market for the above reasons. For some time, of course, enough money is enough, but then again everyone will start paying attention to the inflation risks and the yield of bonds. Then the market will begin to decline.
And a couple of words about gold
Obviously, in the conditions of restoring the economy, the demand for this tool will fall. Especially as profitability increases.
And in the future, we still expect a cycle of tightening of monetary policy, which generally achieves until the end of the demand for gold.
So it's also no strong growth from him.
Read Original Articles on: Investing.com