Doe's Worst Day Since October. What's Going On?

Yesterday can hardly be called a summer day for the financial markets. There was no trace of the usual sleepy movement within narrow ranges. Stock markets tumbled, commodity markets followed. The cryptocurrency market, of course, could not pass by and was also declining at an accelerated pace. At the same time, safe-haven assets such as the Japanese yen or US Treasury bonds were in high demand.

As you can see, the movements were massive. That is, we are not talking about the nuances of a particular market, but about general systemic issues. In short, we observed a movement (or maybe flight) of capital from risky assets to risk-free ones.

The formal reason was the market acceptance of the fact that the delta strain has spawned a real new wave of pandemic, with all that it implies. For us, in the fundamental background, absolutely nothing has changed. We have been writing about the delta and its consequences for more than a month now, as well as about the fact that prices on the stock and commodity markets are far from reality and sooner or later they will have to move towards their fair value.

So we think that what is happening is quite natural. The whole question is how destructive the panic wave will be. Note again that the underlying fundamental background plus / minus is unchanged. This means that the markets can calm down at any moment. However, next week the next meeting of the FOMC will take place, which may add fuel to the fire in the form of tightening monetary policy, if not in practice, then at least in words. And this week, the ECB, in turn, may puzzle the markets.

As for our recommendations, they are unchanged: we continue to sell on the stock, commodity and cryptocurrency markets, buy the dollar and other safe-haven assets.