Flash Alert

 27 April 2022

Dear Fellow Investors,

The Macro Environment

News flow is extremely  negative. Inflation continues to rise.  Shanghai lockdowns are disrupting supply chains, The war in Ukraine  is escalating. Nato, the US and Europe are committing multi billions in weapons funding and Russia is threatening nuclear attacks.   There is a new proxy war between the US and Russia. Add to this food shortages and the possibility of energy disruptions  which all contribute to inflation, no wonder most stockmarkets world wide are selling off.  

However Malaysia and Singapore are exceptions and continue to be well supported due to trade surpluses, high CPO and oil prices and better economic management.  

The agenda of most central banks is to continue to print money and use their tools to maintain liquidity. They will use the on going crises as an excuse to print. Janet Yellen, US treasury secretary  has asked for multi billions of new funds to be given to the IMF to bail out countries such as Sri Lanka.Jamie Diamond of JP Morgan has asked for 1.2 trillion of government funds to address the world food crises.   The list of politicians and business leaders with their hands out for free money  keeps growing.   War is the best excuse of all to create money out of thin air. The defense lobbyists and contractors are lined up in Washington DC getting their pockets filled with all this free money. 

          

            Weekly Volatility or fear index traded on the NYSE

The higher the number the greater the fear. The stock market meltdown in March 2020 saw a rise to over 90. This was caused by monetary tightening. The Federal Reserve quickly reversed their policies to QE and markets recovered.    In  my opinion the same thing will happen again as there is a major US  election in November. If Biden loses power in the congress, his opposition on the first day will open up the oil pipelines  and give drilling permits to the oil companies.  This will immediately lower energy prices and reduce inflation. 

One reason the VIX has not broken out to extreme fear levels is that the market is anticipating a Biden loss of the US Congress in November.   The US 10 year bond yield has also stabilized and is not spiking which could slow the pace of interest rate rises. Weekly and monthly chart support in the Nasdaq and Dow Jones are also showing stability.  Hedge funds with their vast financial resources are buying value at a discount.

I am leaving to Langkawi tomorrow for a short break. Any questions please email me. I will not produce a market report Saturday. 

Stay the course.

Bill