The key US stock market indices - Dow Jones, NASDAQ, and S&P 500 - ended Friday with a new fall. All three indices are now near their local lows, and there is no reason to expect that the fall will end there. Recall that last week, the Fed decided to raise the rate immediately by 0.5%, and also announced a rate hike in June and July by another 1%. This is the sharpest and fastest rate increase since 2000. Thus, it is very difficult to expect that the stock market will ignore these data. It should be understood that even after the rate increase by 0.75%, we are only at the very beginning of the path of tightening monetary policy in the United States. Fed officials are going to bring the rate at least to a neutral level, which is 2.5%, only this year. In the perspective of 2 years, the rate should rise to 3.5%. Thus, stock indices and stocks can be actively adjusted throughout 2022. And if we also recall the QT program, which is the antipode for the QE incentive program, then monetary pressure will be even stronger.
Meanwhile, May 9 has come, and we congratulate everyone on Victory Day. This weekend, it became known that there will be no oil embargo yet. A meeting of EU ambassadors took place yesterday to discuss and sign a new, sixth, package of sanctions against Russia. The Hungarian ambassador refused to sign the document. However, as we said earlier, we do not believe that Hungary will be able to permanently block this package. First, the main principle of the European Union is the search and adoption of decisions that are supported by the majority of EU countries, and not block any decision by one or two countries. Thus, as stated yesterday, negotiations on the sixth package of sanctions will continue, and Hungary, which was offered a 20-month delay with a ban on oil supplies from the Russian Federation, can simply get more favorable conditions for itself. Second, Hungarian Prime Minister Viktor Orban said that for the transformation of the oil refining industry, his country will need significant investments and at least 5 years. Thus, it can be assumed that if the European Union agrees to give Hungary a 5-year grace period, the country will sign the sixth package of sanctions. But we also consider the option of political pressure on Orban and Hungary to be quite real. Of course, we are not talking about threats of exclusion from the EU, but at one time Austria was suspended for three months of membership in the European Union. There are plenty of levers of pressure. Especially because the Hungarian economy is not advanced within the Alliance. Nevertheless, formally we have a split of opinions within the European Union, and in the coming weeks, it will be possible to observe the development of events.
