Daily Market Update Mar 31

Russia's pullback didn't last all that long as additional troops were deployed to take control of the Donbas region. Equities were mixed on the day with Europe and the Americas marginally lower after Asia closed higher.

Crude fell overnight with the news that the US could look to release as much as 1 mn barrels per day over the next six months to help ease the supply shortage and bring down inflation as well. The move appears to be more political in nature with the midterm elections coming in Nov 2022. Historically, the incumbent party always takes a hit at the mid terms and the Democrats' already thin majorities in the House and the Senate could very likely go the way of the Republicans for the next two years.

The US is also trying to get the IEA to coordinate a release from other nations' strategic reserves but no details have been announced yet. OPEC+ in its meeting this week is expected to confirm a marginal planned increase in production.

China's PMIs this morning came in lower than expected but the market reaction to the Shanghai lockdowns, in general, has been quite positive so far. Equities are up and ADRs too on rumors that there was a deal to be made to help them retain their US listings.

The SEC chief came out against that overnight though, saying all audit and disclosure regulations will have to be adhered to.?The US yield curve was well behaved with the 10Y still around the 2.35% level. The 2s10s steepened a little as hawkish expectations from the Fed scaled back marginally - for the first time in the last few sessions.

The NFP number tomorrow will play a key role in determining if we have a 50 bp hike in May. That being said, markets appear to be tuning out of the Ukraine war and an escalation in the month of April could see another big risk-off move. Unfortunately, the probabilities here are not very clear and for the most part, depend on the state of mind of one person.

US intelligence stated that Putin was receiving incorrect intel about the situation in Ukraine and the effect of the sanctions, because his advisors were afraid to tell him the truth. Where we go from here still remains an open question but it would be realistic to keep risk management front and center for now.

Have a great day ahead

“A 10% decline in the market is fairly common—it happens about once a year. Investors who realize this are less likely to sell in a panic, and more likely to remain invested, benefitting from the wealthbuilding power of stocks.”

Christopher Davis