Bulls roaring back! Is it really the bottom? Not so soon...

30 במאי 2022

INVESTMENT CONTEXT

• Russia's Minister of Foreign Affairs, Sergey Lavrov, said that "liberating" the Donbas region of Ukraine was still Russia's "unconditional" priority
  
• Germany's economy minister, Robert Habeck, warned the EU resolve on sanctions to Russia was starting to "crumble"
  
• Turkey President Recep Tayyip Erdogan is still expected to maintain his veto on Sweden and Finland joining NATO
  
• Stores and offices reopened in Beijing on Sunday, after officials announced COVID-19 outbreaks were under control. Similarly in Shanghai authorities announced loosening testing requirements to enter public places as new cases hit their lowest since March
  
• LUNA 2.0 launch is off to a rough start, with investors rocking the asset down 70% on the very day of the airdrop
  

PROFZERO'S TAKE

• ProfZero welcomes the renewed risk-on attitude that seems to be permeating markets. With the S&P 500 finally breaking a 7-week red streak, and Nasdaq regaining 12k support, investors are trying to shrug off the worst of this year's meltdown. Yet, can we call the worst already to be behind? ProfZero thinks - not today. There are yet too many pockets of pent-up volatility to be resolved before buys may be considered organic - inflation is still being driven by energy and soft commodities, Fed and ECB have not completed setting up monetary policy to adjust interest rates and and the consequences of the war in Ukraine are inflicting pain to several developing economies in the Middle East and North Africa, potentially leading to unrests. The progressive reopening of China is definitely behind of the rebound in risk assets - yet ProfZero peacefully reminds that China announced literally last week that it will struggle to score positive growth in Q2. Markets are always 1 if not 2 quarters ahead - positive surprises would be all too welcome even ahead of that
  
• Crumbling European's resolve on sanctions to Russia is expected to erupt on May 30, as EU leaders are set to meet and discuss how to implement new restrictions on Russian energy still flowing to the continent. With a full-blown embargo now off the table, as it would cripple the energy security of the landlocked economies of Hungary, Slovakia and Czech Republic, talks are ongoing to limit seaborne imports while not touching volumes via pipeline. ProfZero has long indicated energy as the true table for negotiations to happen - with fading unity on crude oil, no better cohesion can be expected by the EU on gas down the road
  
• Russia apparently avoided default again on May 27 by delivering EUR 100mln interest payments on two Eurobonds - ProfZero sees this simmering narrative as a silent hope of diplomatic channels being open
  
• After failing to trail the market on May 27's rally, blockchain assets came roaring on May 30, on the back of broader investor enthusiasm. BTC reclaiming 30k mark and altcoins springing back from earlier lows are even more noteworthy as investors whiplashed LUNA 2.0 project relaunch - selection effects may now be once again at work after correlations peaked. ProfZero's are glimmering at the sight of markets - doing their job