SPDR S&P 500 ETF (ETF:SPY), SPDR Energy Select Sector Fund ETF (ETF:XLE) – Selling Stocks and Raising Money: Can the Market Defeat Putin and Powell?
After two consecutive weeks of gains, the SPDR S&P 500 ETF Trust (NYSE: SPY) has now erased its initial losses following the Russian invasion of Ukraine.
A growing number of analysts fear that the market may not be able to withstand the “Two Ps”, said the Russian president. Vladimir Poutine and Chairman of the US Federal Reserve Jerome Powell.
Cash is King: Thusday, Richard Sapersteinchief investment officer at Treasury Partners of New York, said Powell and Putin had made it prudent for savvy investors to sell stocks and boost their cash for now.
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“As the stock market attempts to recover from its correction, markets are fundamentally riskier and more uncertain than before Russia’s invasion of Ukraine. Markets today are driven by war and geopolitics – the embodiment of unpredictable outcomes,” Saperstein said.
The ongoing war has dramatically increased the risks of financial, energy and agricultural market shocks that pose a real threat to corporate earnings and stock market valuations, he said.
How to play it: For now, Saperstein recommends reducing exposure to equities and increasing exposure to cash to reduce risk and provide flexibility in the event of a further market downturn.
Yet while investors insist on remaining heavily exposed to equities, he prefers US equities to international equities. Additionally, he is overweight oil stocks and large-cap tech stocks, suggesting that SPDR Energy Select Sector Fund (NYSE: XLE) and the SPDR Fund for the Technology Sector (NYSE: XLK) may be relatively immune to market weakness.
Saperstein said that even if markets survived the disruption Putin created in Ukraine, Powell said this week that the Federal Reserve was open to interest rate hikes of 0.5% if needed.
Saperstein says his basic outlook is for Russia and Ukraine to reach some form of compromise that gives Putin an acceptable “exit ramp”, a scenario that would likely trigger a “moderate” recovery in stocks and lower prices. Energy.
The worst-case scenario would be for the war in Ukraine to turn into a long-term chore or for a desperate Putin to choose to employ unconventional warfare, scenarios in which stock prices could see another significant drop.
Benzinga’s opinion: US markets reacted incredibly well to the invasion of Ukraine, which is surprising given the amount of risk it injected into the global economy. It appears that a timely resolution of the conflict has already been priced into the stock market to some degree, creating downside risk if that resolution does not occur in the near future.
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