Stock markets rebounded strongly Wednesday, as investors questioned whether the worst is already priced in. I’m certainly not convinced that this is the case, but stocks have fallen a lot in recent weeks, and comments from Ukrainian President Volodymyr Zelensky around NATO membership could be viewed as a first and important step towards a compromise between Ukraine and Russia.
Europe is posting gains of up to 5%, and the S&P 500 gained about 2.6%.
Perhaps what we’re seeing is a hopeful rally rather than one built on solid foundations. But it’s the first glimmer of hope we’ve had in weeks. I’d be surprised if it’s sustained for any significant period of time unless we see actual progress towards a ceasefire and Russian exit.
It comes at an interesting time as well. Europe this week entered into the bear-market territory at the same time as gold came within a few dollars of record highs. There could be a technical element at play here, which, combined with Zelensky’s comments, exacerbates any move to the upside.
All of this has investors asking themselves if a lot of the escalation is now priced in and whether further downside will be much less severe than what we’ve seen in recent weeks. And if so, whether it’s time to dip back in given how discounted the market is compared to the beginning of the year.
Obviously, that’s very hard to say as we don’t know what Russia’s ultimate intentions are, what will bring them to the negotiating table and what, if anything, they’ll accept. It’s all been smoke and mirrors from Russia, which makes anticipating this extraordinarily difficult.
Bitcoin Riding The Risk Wave
Bitcoin is riding the risk wave higher and in true crypto fashion. Bitcoin is up around 10% on the day and back above $40,000. As I’ve stated with equities, oil, and gold, the optimism we see in the markets looks fragile at best, so while crypto traders may be excitedly looking at $45,500 and asking “what if,” we’re one headline away from these gains being quickly wiped out—as has been the case for weeks now.