Poland Gas Cutoff, Tech Disaster Leave Markets Reeling
It'd be difficult to imagine a more inauspicious mix of headlines than those investors confronted on Tuesday.
A "major" recession call from a major Wall Street bank fought for space above the fold with news that Moscow cut gas flows to Poland and Bulgaria, while Sergei Lavrov warned on a "serious, real" threat of nuclear war.
Last month, Vladimir Putin demanded payments for Russian fuel be made in rubles, a condition Europe generally refused to countenance, even as Moscow developed what some i
Now for the bright side…uhh….mmm…..
I’m buying tech at this point. The inflation and tightening narrative seems overdone now–demand destruction that is taking effect now should ease wage and price growth. The supply chain issues that we all know about are baked in. I bet we get 100bps of tightening (2 50s), a little recession going into the election, and then the easing starts anew.
Waiting a bit longer till core inflation shows clearer signs of exhaustion but I am with you.
It seems like momentum is growing for a European ban on Russian oil, with Germany saying it could tolerate such an action. Russia’s oil infrastructure is designed for export to Europe, and lacks capacity to send an equivalent volume of oil to other markets, e.g. China. Thus Russia’s oil production would be largely shut-in, greatly reducing Russia’s revenue as well as, before too long, degrading Russia’s wells. This would drive significantly higher oil prices and thus inflationary pressure, and potentially even more pressure on the Fed. A Fed under greater pressure is not good for duration.