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It Seems Like Goldilocks Will Continue

By Louis Navellier. Originally published at ValueWalk.

Goldilocks Rate Hike Balance Sheet Runoff end of coronavirus stimulus checks

In his Daily Market Notes report to investors, while commenting on the continuation of Goldilocks, Louis Navellier wrote:


Q4 2021 hedge fund letters, conferences and more

West’s Conundrum

Right on cue, Putin found an excuse to move troops into eastern Ukrainian territory on Monday, the day after the Olympics ended, just as he had done in Georgia after the 2008 Beijing Summer Olympics, the last time he attended the opening ceremony of an Olympic Games. He’s openly predictable as is the West’s lack of response.

The first most surprising response has been from Germany suspending approval of the Nord Stream 2 pipeline. That was surprising because Germany is very dependent upon Russia for energy. And I should add that we are, too. As Alaska crude oil tailed off, the US was importing more and more Russian crude oil. And if we try to cut Russia off, then instead of $5-gallon gasoline in California, you might have $7 per gallon.

So the Biden administration is in a bit of a conundrum of what they can do right now. They’ve only imposed sanctions on those two provinces in Ukraine, and there are no sanctions against Russia yet, although they’re supposed to be coming. Both the US and Britain have said they will be imposing some sanctions soon.

The event has also added octane to the already highly volatile markets, pushing around indexes of all ilk  - equities (down sharply around the world), debt (US 10-yr yield dropped to 1.86%), gold (jumped to $1,911), oil (WTI up to $93.41) and crypto (Ethereum down to $2,600).

There is a clear Risk-Off sentiment but there was a noticeably more bearish atmosphere just a few hours ago when the news was fresh and the US markets were closed. The risk all along was not about changing flags or only politics in Ukraine, it was all about the reaction of the West, and if it’s only going to be sanctioned is not nearly the wild card of a shooting war.

Mr. Putin apparently knows what he’s doing, and he’s not scared of the west. He wants us to fight among ourselves about how we should do things.

Offensive Stocks

Energy prices are going to be higher. That’s going to drive inflation higher. The US has been very hostile to domestic energy. Hopefully, they’ll be a little bit more friendly now since it’s pretty easy to fix things and boost the US output if we have the will. Right now because energy prices are so high, a lot of producers are going back and moving drilling rigs into old fields that were depleted. California still is trying to ban all its energy production by 2025 and I don’t think that’s going to change tomorrow. But if we did cut off the Russian oil imports, maybe it would.

So back to focusing on the real issues:  The Fed tightening and inflation, whether Covid is really over and how big the reopening spending pop will be, and how will earnings growth and P/E multiples wash out to put a bottom in and start moving up again with confidence.

Obviously, energy stocks are rallying. A lot of the cybersecurity stocks look good, too, because everyone anticipating the cyber wars. It’s very interesting. But the main thing you folks should know is that money doesn’t leave the market. It just goes somewhere else. And it’s definitely going to the energy stocks and other stocks that are deemed offensive.

Goldilocks Continues

In the meantime, what are the central banks going to do? The central banks are going to use the whole Russian Ukrainian thing as an excuse to maybe not raise rates as much as they might have earlier.

The European Central Bank is already doing this. I suspect the Fed will now definitely move in quarter-point increments versus half-point increments because of what’s happening. So everybody’s going to tiptoe.

The central banks will now be more cautious and that means that Goldilocks will continue, where central banks are accommodative and earnings are very strong.

We have consumer confidence coming out today. What we want is to look at what consumers are doing, and not so much their confidence. The January retail sales are surprisingly strong. Although again, when consumers spend more money at the gas station, the grocery store, they do change their spending habits. So we’ll just have to see what’s going on.

I don’t see any big rush out of the stock market right now. I just see a little bit of reshuffling of where the money is going.

Coffee Beans

A 500-pound black bear nicknamed Hank the Tank is causing alarm in a town near California’s Lake Tahoe where the massive bruin has been blamed for damage to 38 homes and has triggered more than 150 calls to authorities. Officials are considering trapping and euthanizing Hank. The BEAR League is frantically working to save his life by reaching out to various wildlife sanctuaries in hopes of finding him a safe home. Source: UPI. See the full story here. 

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