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New Lows Await The Markets

Published 09/22/2022, 09:00 AM
Updated 05/27/2024, 01:10 PM

At the time of writing, EU and US futures are slightly positive after yesterday's collapse: NASDAQ 100 Futures, S&P 500 Futures, DAX Futures, FTSE MIB Futures.

Russian President Vladimir Putin signed a partial mobilization decree starting today, stating that he wants to defend Russian territories and that the West intends to destroy Russia. In a televised speech, Putin said his goal is to 'liberate' the Donbas region in eastern Ukraine and that most of the region's population does not want to return under the 'yoke' of Ukraine.

Last week UBS published an update report on the performance of China's economy: the 2022 GDP estimate was raised to + 2.7%, from the previous + 3%, in 2023 growth should accelerate to 6%, which is in any case lower than the + 5.4% estimated in the previous report.

A cascade of downgrades is coming due to the growth rate of the world's largest economies. Before China, it was the US and Italy that were downgraded. Market tensions are evident, with government bond yields rising. Yesterday, as expected, the markets did not like the super rate hike by the Fed.

It will not be the last, although, as always, the Fed will observe inflation for monetary policy decisions.

Hot Stocks And Instruments

FTSE MIB: The situation is not positive. With central banks increasingly moving towards a restrictive monetary policy, an index conditioned by bank stocks such as the MIB is in trouble. Do not believe the legend that the rate hike is suitable for bankers.

This is not precisely the case, as such an aggressive rate hike leads to an increase in interest rates and a contraction of credit due to the higher cost for end customers. I expect the MIB to fall to 21,000 shortly.

NASDAQ: the index reacted negatively to the rate hike. It is the most damaged because this index comprises companies with a high level of debt. A debt will cost more and more with the rise in interest rates, eating into company profits. I expect 11,500 shortly.

Tesla (NASDAQ:TSLA): The Wall Street Journal wrote that the electric car maker is about to suspend plans to produce battery cells in Germany. That's not good news for the title, which continues to be overpriced.

In addition, competition is lurking, with Stellantis (NYSE:STLA) surpassing Tesla in European sales of electric cars. The sticking point is the company's enterprise value to sales ratio, which places it among the most expensive companies worldwide. Long entries are to be evaluated if it drops below $ 240.

Oil: Iran does not rule out the possibility of a meeting on the sidelines of the United Nations Annual General Assembly in New York to relaunch the 2015 nuclear deal with world powers, said Nasser Kanaani, an Irani diplomat. He added, 

"Ali Bagheri Kani, the chief nuclear negotiator, will be present at the General Assembly as part of the delegation, but there is no specific plan to discuss the nuclear deal. However, I do not rule out the possibility of talks concerning the agreement"

Oil prices are in free fall, starting to discount a global recession that will collapse oil demand. Furthermore, a possible agreement with Iran will lead to an oversupply of oil. As for future pricing, we will see $75 by the end of the year.

Telecom Italia (ETR:TLIT) makes a new all-time low. Barclays has cut the rating to Underweight, with a target price of € 0.15. In the note, the analysts wrote that the fair value is just above zero without extraordinary transactions.

I said this at the beginning of the year, with the slight difference in the target assigned according to my proprietary model at 0.16. As always, investment banks always arrive later, but I feel happy as I have received many thank-you emails from investors who sold above 0.40. The sticking point is always the same: the company has insufficient profitability and very high debt.

Intesa Sanpaolo (OTC:ISNPY): One of my favorite bankers, definitely at an attractive price. Analyzing the balance sheet, the net margins are convincing. Considering the capitalization, the stock is at a discount. According to my model, the title is worth 2.60. For an entry, I would wait for area 1.60.

Gold: Prices are falling to annual lows. Earlier I talked about how precious metals have never performed well during the Fed's tightening policy phases, and that is what we are seeing.

The behavior is also negative during the recessive phases, so even if I had given a price in which I would have considered myself buying gold at $1650, and we are very close to it, I would wait another couple of months to check the trend of inflation.

As an alternative, I like silver, an important metal for the production of green energy (especially in solar energy and electric vehicles), but it is also an industrial good. About 50% of the demand comes from industrial uses, and with a recession on the horizon, I would wait another couple of months to purchase.

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