Stock price sharp rebound
Stock prices in various countries are recovering sharply.
Background is,
(1) Those who were short have been buying back, some have been squeezed.
The trigger is,
(A) The possibility of a ceasefire in the Ukraine conflict has emerged.
(B) The FOMC has passed as scheduled.
(2) Rebalancing purchases by pension funds, etc.
If that’s all, the rise would be almost over, and it may turn downward again.
(ア) The economy is expected to slow due to rate hikes, high commodity prices, and shortages of raw materials.
(イ) Interest rates have exceeded dividend yields. If dividends stop growing, the attractiveness of stocks will diminish.
(3) However, economic stimulus measures are emerging.
(A) China is increasing its economic stimulus. (Moves to lower reserve requirement ratios and somewhat relax regulations)
(B) This is less a stimulus and more a wartime demand surge. It was not heavily anticipated.
The most impactful was Germany.
On February 27, Chancellor Scholz announced an increase in defense spending. An emergency €100 billion will be allocated from the 2022 budget toward strengthening the Bundeswehr’s equipment. Furthermore, defense spending, which had remained around 1.5% of GDP, will be raised to above 2% annually going forward. It intends to invest in fighters, warships, and soldiers’ equipment to strengthen the federal forces.
Since then, it has rippled to other countries.
Additionally, the international creation of the "Ukraine Solidarity Fund" is being discussed with the EU.
It is a plan to support immediate essential living supplies and post-war economic reconstruction.
Donations would be solicited from countries around the world.
If such talks advance toward realization, stock prices may rise another step.
During the COVID-19 period, extraordinary fiscal policies and monetary easing were implemented due to special circumstances, triggering a substantial rise in stock prices, but,
this time, due to the Ukraine crisis as a special circumstance, a large military budget expansion and reconstruction plans may again push stock prices higher.
During COVID, monetary easing reached its limit and fiscal spending expanded greatly. No matter what happens, it seemed impossible to go further. Yet, in front of President Zelensky, what is impossible may become plausible.
Again, many strategists’ stock price forecasts may be overturned.
COVID measures and Ukraine reconstruction are difficult to address with ordinary economic/investment analysis.
Just in case, I still do not expect a further rise in stock prices.
This time, with rising commodity prices, economies around the world must be strained.
It is not easy to mobilize reconstruction funds.
Japan is targeted, but Japan is also in difficulty.
Those who can provide funds are oil-producing and resource-rich countries.
If Saudi Arabia contributes, then ...
× ![]()
