FX.co ★ Ukrainian-Russian conflict, day 51. The risk of a recession in the US is growing

The key US stock market indices - Dow Jones, NASDAQ, and S&P 500 - ended Thursday with a new fall. Thus, so far everything looks as if a new round of correction has begun, within which stock indices will fall below the minimum of the previous round. If so, then we are going to see at least one more fairly strong drop, because now the quotes are located much higher than their recent lows. There has been little news from Ukraine and Russia over the past 24 hours. Perhaps the most important was the news about the loss of the missile cruiser "Moscow" worth $ 750 million, as well as an interview with Dmitry Medvedev, who clearly outlined the state of affairs around the desire of Sweden and Finland to join NATO. However, the loss of military equipment on both sides is normal when countries are in a state of military conflict.

According to various sources, in the near future, almost all forces should concentrate only in the Eastern and Southeastern parts of Ukraine. It cannot be said that military operations have been stopped at the moment, but in recent days the number of missile strikes on major cities of Ukraine has sharply decreased.

Meanwhile, in the States, major economists have begun to predict a recession for the country's economy. From our point of view, it's like expecting a new world flood when the weather forecast announced that it would rain. It is obvious that the American economy is also suffering due to disruptions in supply chains around the world, due to rising oil and gas prices, due to high inflation, due to the military conflict in Ukraine. But it suffers from the above factors much less than, for example, the European economy. This is seen in the GDP indicators. For example, in the fourth quarter, the US economy grew by more than 6%, compared to the third quarter. Thus, even if the Fed raises the rate at the next six meetings to 2.5% (neutral level), this will not mean that the American economy will slide into recession. Roughly speaking, the Fed has a lot of room for maneuver. The Federal Reserve can raise the rate at each meeting and observe the effect on the economy over the next month. Even if it starts to slow down, the value of GDP +6% makes it possible to "cool" it a little. Therefore, we believe that no recession threatens the States. Recession, and at the same time stagflation, food and energy crises threaten the European Union. However, the tightening of monetary policy and military actions in Ukraine will continue to create pressure on risky assets. That is, for stocks, cryptocurrencies, and others. We still believe that demand will grow for Treasury bonds and deposits.