🎙Russia and Oil Again🧨

Equity markets lost footing as the increased sanctions on Russia added geopolitical risk that is likely to spread to the economic realm. It does not help that NATO is also eyeing on having unified troops in the current context. 

NATO has the intention to increase its level of troops in the eastern flank to combat Russia’s aggression. The White House is also targeting more sanctions on Russia’s lower house parliament. Money on the sideline isn’t flowing in yet again as calculated risk comes in. 

Pika World will be cautious yet again on accumulation as the recovery of the indexes has been robust.

📉The Yield Curve Drama📈

As the financial markets are plugged into more uncertainty, investors are closely watching the yield curve, which is very close to inverting. This is a scary signal that the stock market is perhaps coming to a correction. 

The spread between the 10-year and 2-year notes are narrowing. When they become negative such as the short term yield being higher than the long term yield, it reflects the risk of a recession in subsequent years. 

📞An Alternative Story⏳

Still, some analysts pointed out that an inverted yield curve may not necessarily mean a disaster for the equity market since the development process of a recession after an inverted yield curve could come after several years. 

A look back at the inversion in 2005 saw only the Great Recession arrived in late 2007. In that year, the stock market had performed relatively well despite the onset of inversion. For example, some research showed that the average return of the S&P 500 in 12 months after the initial inversion was at 7.4%. 

🪜Other Yield Curve Analysis?💰

The alternative is the study of the spread between the three-month bill and the 10-year yield. When it flips negative, a looming recession often occurs swiftly. The average return for the S&P 500 after 12 months from the onset of the inversion provided a 1.4% return. 

Hence, some investors are looking closely at this pair of yields too. 

There is no doubt that the market is in a period of heightened volatility as we usher into a new earnings season soon.