The key US stock market indices - Dow Jones, NASDAQ, and S&P 500 - ended Tuesday with a new fall. In principle, everything is happening now exactly as we predicted earlier. The US stock market is adjusting after a long and strong growth amid the tightening of the Fed's monetary policy and the military conflict in Eastern Europe. In 2022, we would not count on a new upward trend in stocks and indices of the American stock market. If a situation is still possible in the foreign exchange market in which traders take into account all the factors of the fall in advance (for example, future increases in the key rate, which are already known), then such a situation is impossible in the stock market. Expectations and speculation are more important in the foreign exchange market. On the stock market - a specific reaction of investors to changes in the economy. If the yield on Treasury bonds and bank deposits continues to grow (and it will continue to grow due to the Fed rate hike), then the demand for them will grow. Since the Fed plans to launch the QT (quantitative tightening) program from June 1, which, in essence, means removing excess money from the economy, investments are unlikely to increase. Therefore, there will be two parallel processes. The first is the flow of capital from risky assets to safe ones (the profitability of which increases). The second is a decrease in the money supply, which in itself will reduce investment opportunities and throw additional securities on the market (which are now on the balance sheet of the Fed).
Meanwhile, the issue with Hungary, which refused to support the oil embargo against the Russian Federation, is beginning to be resolved. Ursula von der Leyen will have a personal conversation with Viktor Orban today. French President Macron also promised to call Orban. Naturally, the negotiations will concern the issue of Hungary's approval of the sixth package of sanctions in full. According to various sources, Hungary may be provided with financial compensation for supporting sanctions against the Russian Federation. It will be difficult for the country to abandon Russian oil and it will be difficult to replace it since it has no access to the sea (oil cannot be delivered by tankers). That is why several other EU countries were offered extended periods during which they should abandon purchases of Russian oil. Now it has become known that there may also be financial compensation. One way or another, the European Union is almost guaranteed to achieve the introduction of the sixth package of sanctions, it may just take a little longer.
Meanwhile, there is no special news in Ukraine. Unfortunately, some sources report that Belarusian troops have begun moving to the border with Ukraine. Some military experts believe that Belarus may soon introduce its troops to stop the flow of Western weapons to the Eastern and Southeastern Front. Thus, the cities of Lviv, Lutsk, Ivano-Frankivsk, and Uzhgorod may be attacked. We do not dare to judge how much this information corresponds to the truth, but it is a fact that Russia would like to stop the flow of NATO weapons to Ukraine.
