Can we fight inflation?

American markets continue to collapse, and it’s understandable, Powell has arranged a clear agenda for everyone – money will rise in price while inflation is high! What should happen in order for inflation to stop – raw materials should collapse, the cost of production should fall, sales in all segments slow down – in fact, stop consumption.

Energy markets have heard the signal. Oil and gas prices have already fallen, and most goods have plummeted – metals, grains, soybeans, everything – the fight against inflation is in full swing.

Yes, you mostly don’t notice it in everyday life, but central banks are fighting an unreal battle, we’ll see how it ends.

Will the crisis end? Yes, of course, the question is with what losses, and which sectors will die, like, for example, the auto sector in the USA after 2008, or a bunch of companies and online stores after the dotcom crisis! But it will definitely pass.

Crypto market outlook

Against the background of the severe collapse of the US stock market, which began its campaign with a speech by Jerome Powell at Jackson Hall, cryptocurrencies look strong.  They fell after the rebound, but overall the situation is stable.

The main question is why and for how long?

Why – it seems that the crypto markets plummeted -70% since the beginning of the year, this is a lot, the stock market fell no more than 30%.

They will hold on for a long time: if the situation on the stock market does not change and we see 3500 points on a wide SP500 index, then we will see a powerful drop in the crypto with Bitcoin trading below 14000.

Let’s see – while we keep portfolios in point ideas and mostly in free positions.

The world economy is increasingly plunging into a protracted crisis, recession and inflation

But how do the markets behave?

In the chart you can see that bullish markets are much longer and more powerful than bearish ones.
In recent years, they are generally very short.

Yes, collapses happen, but they are fleeting, for many reasons:
Inflation, money printing, the model of the world economy of constant growth, new corporate giants and growing consumption.

No one is ever sure what will happen this time, but there are not so many options, the markets will have to beat inflation and those who want to save their money will have to invest in good corporations.

Yes, it is the growing business, retail, raw materials, and ultimately technology, pharmaceuticals, finance, are the ones that will rebound price shocks the fastest.

Nowadays, everything is happening very quickly, much faster than 10-20 years ago, the shock of the pandemic was redeemed in less than 6 months, before it ended! But now there is a systemic crisis, liquidity is being taken away from the market, this is a different situation, and we will see how the regulator will cope with it.

Bond markets are under pressure, in anticipation of an aggressive rate hike by the US central bank

The expected stop at 3-4% will probably not happen, the released data showed an increase in inflation, which means that the FED will have to take unpopular measures and tighten liquidity. There may even be an increase of 0.5-1% at once.

The fact that we are starting to live in times of expensive money will take some getting used to. It is possible that we will see the rate at 5-6% next year, and yes, it will be a shock to the market, but there will be no other options.

We sold all our positions on bonds yesterday and will stand aside from this market for now, until clarity appears.

This situation will increase the risk of defaults for many issuers, so I recommend that everyone carefully monitor their so-called conservative investments.