🚘Equity Markets on a Rough Ride💸

As the supply chains in China are back in the highlight of the week, the Covid-18 lockdown in China is yet to hit many companies as it faced the worst outbreak in 2 years. 

Cases have been jumping hihg since Sunday as many manufacturing plants were shut off for non-essential operations. Among those, medical, food and fuel deliveries were still functionally and many citizens in affected cities had to do PCR tests over the next few days. 

It is likely to cast a shadow over global economic growth as the giant economy hit with a cooling blanket on more stringent lockdown measures in key cities of manufacturing. 

🎈A Bleak Outlook?🔫

Whenever a joyous news ride on, there is bound to be a negative. The Ukraine-Russia war is an example of the oil-price shock hurting the risk-on sentiment. It is likely to pull down US spending and weaken economic growth. 

Analysts were quick to discount some growth given the background of geopolitical risk. For example, Goldman Sachs cut its economic forecasts and highlighted the risk of supply chain issues. As a result, there appeared to be a higher factoring of a possibility of a recession, although the risk is still low. 

🎁Risks posed by Geopolitical Tension🔨

It is a multidimensional risk that is affecting the world market. First, there is a sharp rise in commodity prices and poorer consumer sentiments. Internal export tends to moderate in uncertain times. The fall in disposable income is likely to hit hard on the households as gas and food prices jump. The pandemic savings are draining out as lower-income families had to spend a large portion of their income on food and gas. Therefore, there is a likelihood of reducing spending on clothes and furniture. 

As consumer sentiments soured, so will be the consumer spending. The University of Michigan showed clearly that the consumer sentiment index had fallen by about 30% for the past year as consumers took a cautious stance on the ongoing war. 

Given the uncertainty still roaming around the market, Pika World maintains a cautious stance and look for opportunity in alternative assets to hopefully cushion the blow in our portfolio.