The key indices of the US stock market - Dow Jones, NASDAQ, and S&P 500 - ended Wednesday with a new collapse. As we have said more than once, this is not surprising, since this is the scenario we originally proposed for 2022: a powerful, global correction. And we believe that this may be just the beginning since the Fed has raised the rate only twice so far and has not even begun to reduce its balance sheet yet. What will happen when the Fed raises the rate to 3%, and the Fed's balance sheet starts to shrink by $ 100 billion every month? The conclusion, from our point of view, is obvious. You don't even need to be an analyst here to understand that if the stock market grew on the QE program, then it will fall on the QT program. In total, over the past few months, the NASDAQ and S&P 500 indices have lost at least 30%.
Yesterday, inflation for April was published in the States. Its value was 8.3% y/y, which is higher than forecasts, but lower than the March-month value. This is exactly the meaning we assumed. Inflation is not yet the time to fall quickly and strongly, since, again, the Fed has only slightly tightened monetary policy so far. Even within the Fed itself, they say that the process of returning inflation to 2% can take at least one and a half to two years. All this time, the regulator, in theory, will have to raise the rate and work on QT. Thus, stock indices, stocks, and cryptocurrencies can fall for a very long time. In principle, we also predicted the fall of bitcoin, which has now gone below $ 30,000 per coin. An inflation of 8.3% does not give grounds to assume that the planned course of monetary policy changes will be somehow adjusted by the Fed. Recall that if inflation continued to accelerate, it would be quite possible to expect a rate increase at one of the next two meetings by 0.75% at once. If inflation collapsed below 8.2% (forecast), one would expect that the rate of the rate increase would decrease slightly in comparison with the current plans of the regulator.
As for the military conflict in Ukraine, fighting continues along the entire front line. The Ukrainian Armed Forces have had success in the Kharkiv region and have already practically pushed the Russian army to the borders of the region. As they say in Kyiv, after the cleansing of this area, the AFU units will begin to be transferred to other areas for their complete liberation. The Russian Federation has not yet announced full or partial mobilization, so it will be very difficult to keep the captured territories of the Russian army. Especially because Western weapons are now pouring into Ukraine like a river. Some military experts have started calling the date "August-September", when military operations on the territory of Ukraine may end. It is also known that Russia has pulled almost all missile weapons installations to the collision line. In the next few days, a powerful missile strike may be launched in all Ukrainian cities.