Equity markets made a strong recovery from the early collapse, reflecting a new dynamics of buying the dip than the usual form. The Nasdaq rose sharply, with Dow posting a modest gain too due to the more economically sensitive nature of the index.
The backdrop was the worry that the western response towards a heavy Russian oil sanction could increase oil markets. However, the latest package of sanctions pointed to relief as it was created to allow the crude payment to persist.
🍏Why oil sanction would be disastrous?💣
If the US targets Russia’s oil export, it will reduce the crude supply available globally. This will push the price of oil to rise further. We are experiencing a condition of elevated inflation, and the Fed is keen to raise interest rates a few times to tame inflation. This could include reducing bond holdings too.
Hence, the dual impact of a tighter monetary policy coupled with a robust oil price can tamper with economic growth. This will strain economically sensitive sectors or cyclical ones, which are often stocks in the Dow component.
We are seeing renewed interest in the technology names that will heavily crash in early trading hours. Nasdaq has also entered the bear territory, and thus, it has more support based on a recovery mode.
The market continued to be fragmented, and Pika World is cautiously accumulating an essential portfolio as we further diversify our risk.
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All is well.