Sale in Stock Markets amid OPEC + Decision

5 oct. 2021

World stock markets started the week on a minor note. The sell-off took place across the entire spectrum of the US stock market and spread to the rest of the world: Japan's Nikkei 225 fell more than 3%, while South Korean Kospi lost 2.16%.

We have already written about the reasons for what is happening more than once last week (the energy crisis, the change in the vector of the FRS monetary policy in the foreseeable future, the potential default of the United States and Evergande).

OPEC + was an additional reason for sales yesterday. The fact is that the markets were counting on the cartel and allies to heed the requests of the White House, India and other countries and increase production by an amount exceeding the planned 400K b / d.

Considering the scale of the energy crisis, both actual and potential, as well as the fact that OPEC + had long ago achieved its goal of rebalancing the market, and let's not forget about prices of 80 per barrel, the hopes were justified. But they did not come true OPEC + decided to stick to the base plan (in July, the group agreed to increase production by 400,000 barrels per day per month until April 2022).

After this decision by OPEC +, everyone was very depressed, because it is obvious that inflation will break records again. This means that the central banks will begin to roll back ultra-soft monetary policies. In such conditions, it will not be easy for the stock market to grow, especially given the current totally inflated prices.

Since all the current factors of downward pressure on the US stock market remain in play, we see no reason to change our “sell” recommendation. Moreover, new problems may appear on the horizon: an increase in the yield of Treasury bonds, which will provoke an increase in capital outflow from the stock market, a reduction in fiscal stimulus, an increase in taxes, global debt, which has already exceeded 350% of world GDP, etc.