I’m skeptical of this for the following reasons:thedollar wrote: ↑Thu Feb 24, 2022 6:24 amToday feels like the bottom. Our worst fear has come true and nothing really affected the western world truly. This won't be a WW, this will be forgotten shortly. Or maybe the market will bottom out within the next month if something rate (non-war) related happens in March. I predict the market will be back up in 5-6 months. Let's see how this prediction ages
1. None of the underlying energy dynamics have changed, if anything this conflict makes energy supply even tighter. Most analysts seem to think that there won’t be much new energy supply coming online in 2022 because there just hasn’t been investment in the space. It might even increase energy demand because war requires so much energy (to include the increased deployments and training we will see from NATO for coming years, even though direct NATO conflict is unlikely). Higher energy prices are of course inflationary, but if they persist long enough they will also structurally change markets. Most market participants are ridiculously under-invested in energy as a sector still. Ditto commodities as a whole (Ukraine is a huge grain producer).
2. None of the underlying monetary policy dynamics have changed. Keep in mind, the Fed hasn’t even finished tapering or started raising rates yet. Liquidity is going to get sucked out of the markets. Valuations are still high. My feeling is that the market still hasn’t come to terms with the Fed put expiring. If the Fed is serious about fighting inflation, then broad US equities will be the casualty. Apart from the brief taper tantrum, the Fed has supported markets for the past decade. Inflation is a much bigger political issue than equity valuations.