After a sharp correction, in early February, financial markets stabilized, the indices rebounded, volatility declined. But the result of the S & P 500 index of -4% for the month still reminds investors that prices can move not only upwards. Meanwhile, it was possible to hide fr om global instability at Ukrainian sites, so the UX index added another 6% for a month and already shows + 15.8% since the beginning of the year, and this is in the hryvnia, which has also significantly strengthened since the beginning of the year. The most important global issue of concern to investors is the growth of interest rates. For example, the yield on 10-year US bonds continued to grow and almost reached 3%, the yield of similar Ukrainian securities is now about 7.3% and the difference (4.3%) between them is historically low and the same situation is typical for most developing markets. Therefore, a further increase in rates in the US is likely to trigger interest rates in emerging markets, including Ukraine, which will certainly complicate their access to international capital markets. Unexpected news was that the Chinese Communist Party decided to amend the constitution and remove the restrictions of the presidency by two terms, which would allow current leader Xi Jinping to reign for life. Such a move, for a short term, will probably add stability to China and will allow for greater progress in reforms, in particular to lim it credit growth, but not the fact that this will lead to long-term stability. After the tradition of power shift in China was broken - the likelihood of conflicts in the next transition of power has increased dramatically. In addition, Xi Jinping will probably act even more decisively, if not aggressively, in the international arena and this may also scare the markets in the future.
We remain optimistic and expect the stock indexes to grow this year despite a recent correction. And although we believe that interest rates around the world are likely to grow further, the acceleration of the economy and the growth of corporate profits will be more weighty factors and will not allow the stock markets to fall. In addition, monetary policy, both in the US and in Europe, will remain stimulating, although incentives will be reduced. In Ukraine, we expect that the authorities will nevertheless meet the necessary minimum to receive the next tranche of the IMF, and the economy will continue its slow recovery, which could accelerate after the 2019 elections. Therefore, we also expect the continued growth of national stock indexes.
