• Ukraine top performer among the world’s stock markets –

September is statistically the worst month on the stock markets. The first week of September was already well in line with the statistics with falling share prices, falling commodity prices and falling crypto markets. The weak US labour market data once again led to a sell-off in equities, commodities and crypto markets on Friday. The Fed is likely to cut interest rates on 18 September. The only question is how big the interest rate cut will be. The situation is now very reminiscent of 2000/2001 and 2007/8, when interest rate cuts led to bear markets. However, the change in sentiment is also reminiscent of the coronavirus crash in March 2000. On the other hand, there are often exaggerations following the manipulated US labour market data.

At the end of August, Wall Street and the DAX reached new all-time highs, but now sentiment is turning and there are fears of recession again. Until then, the Eastern European stock markets had once again clearly outperformed the Western stock markets. Despite the war, the Kiev stock exchange became the top performer among all world stock exchanges (+39%!) However, there are also great opportunities in the Balkan countries, as well as in Georgia and Kazakhstan. Risk-averse investors can buy shares from Kazakhstan directly online via the broker Freedom Finance (Freedom Broker) from Cyprus if they open an account there beforehand, which is easy to do at the following link: </strong

https://freedom24.com/invite_from/2952896 .

Andreas Männicke also gives his assessment of the new opportunities in Eastern Europe in his stock market letter EAST STOCK TRENDS (www.eaststock.de) and in his new EastStockTV video, episode 236 at www.YouTube.com.

Strong correction after weak US labour market data

September is statistically the worst stock market month of the year, which was already evident in the first week of September. The weak US labour market data triggered a sell-off on the equity, commodity and crypto markets on Friday. ‘AI stocks’ such as Tesla and Nvidia came under particular pressure. Even gold, an otherwise ‘safe haven’, fell by 0.77 per cent to USD 2495/ounce on Friday, although gold is likely to benefit from the next interest rate cuts by the Fed.

In August, the stock markets quickly recovered after the Japan mini-crash on 5 August in a V-shape without bottoming out. Wall Street even reached new all-time highs for the S&P index at the end of August, as did the DAX, but from the beginning of September there was a strong downward trend again, especially after the weak US labour market data on 6 September. Instead of the expected 164,000 new jobs, there were only 142,000 new jobs in August, which is more indicative of a recession. However, these are only rough estimates. US labour market data is often revised downwards in the following month. For example, the number of new jobs in July has now been revised from 114,000 to just 89,000. There was also a revision of the last 12 months, according to which over 800,000 fewer new jobs were actually reported than previously estimated. This almost looks like a manipulation of the markets. In any case, it is surprising why financial market participants always overreact so frantically after the US labour market data – often in both directions. The ‘R-word’ recession is doing the rounds again and causing fear. Weak US labour market data is often associated with fears of a recession. However, weak oil prices and weak prices for industrial metals also point to an impending recession in the US.

What will the FED do on 18 September?

The new GDP figures for the third quarter, which could provide more information, will not be delivered until October. However, it seems that not only the US economy is slowing down, but also the Chinese economy, which is already experiencing deflation. Everyone is now eager to see how the Fed will react to the new US labour market data on 18 September. Most market participants believe in an initial interest rate cut of 0.25 basis points. Others are hoping for a larger interest rate cut of 0.5 basis points and thus a kind of liberating blow.

But beware: interest rate cuts only have a lasting positive effect on the equity, commodity and crypto markets if the economy is stable. In the event of recessionary tendencies, the negative effect is amplified in retrospect. The problem is that the Fed is currently withdrawing a lot of liquidity from the market and reducing the size of its balance sheet. The M2 money supply in relation to GDP recently fell below the trend channel in the US, which can be seen as the first warning signal. The second warning signal is that the inverse interest rate structure is unravelling and is now positive in the US for the first time in a long time. In the past, this was always a sign of an impending recession and tipping stock markets, as profit margins would then also decline.

Will VW become a restructuring case?

The problem is that an actual recession is always signalled too late with the GNP figures. For this reason, early indicators such as purchasing managers’ indices, consumer confidence, incoming orders, retail sales and the business climate index are used as a guide, but these have recently tended to indicate economic weakness in both the USA and Germany. The question is always whether there will be a ‘soft landing’ or a sharp economic downturn. A sharp economic downturn usually occurs when another serious, unforeseeable event such as a ‘black swan’ occurs, as in March 2000 with the coronavirus crisis or in 2008 with the insolvency of the major investment bank Lehman Brothers. Then the state will once again have to try to save what can be saved. In Germany, we already have to be careful whether VW becomes a restructuring case, which would be very expensive for the state. VW now wants to make 20,000 employees redundant and close two plants, but the trade unions do not want to go along with this.

Ampel government provides no new impetus for the economy

The state now wants to withdraw from Commerzbank and reduce its 25 per cent stake. The IFO business climate index has now fallen for the fourth time in a row to its lowest level this year. The mood among companies is extremely poor. Many German companies want to leave Germany because energy prices are too high, as they are making losses here, which is also the fault of the traffic light government with its absurd energy policy.

In the elections in Saxony and Thuringia, as in the previous European elections, the traffic-light government was once again punished to near insignificance. The AFD and BSW were the big winners on the issues of migration and the war in Ukraine, while the CDU just about managed to hold on. There are no signs of any new impetus for the economy that would also bear fruit, especially as energy prices are still too high despite falling oil/gas prices, which are the traffic light government’s own problems. It would be fatal to only ever cite the Ukraine war as an excuse for the disaster of the current traffic light government.

Is the situation now comparable with 2000/2001 or 2007/8?

A great deal is now reminiscent of the situation in 1987, 2000/2001 and 2007/8, when interest rate cuts led to bear markets or even a crash. The history is always similar: first bull markets that lasted for years, but were driven up by a few stocks with sectoral overvaluations (like the ‘AI stocks’ now), then rising inflation, then sharply rising interest rates, then an interest rate plateau, then falling inflation rates and then, after the first interest rate cuts, falling stock markets, but also often falling commodity markets due to recessionary tendencies. On 18 September 2007, the Fed also cut interest rates by 0.5 basis points, which led to the banking crisis and the subprime mortgage crisis in real estate in 2008 and ultimately to the insolvency of the US investment bank Lehman Brothers and a stock market crash. At that time, interest rates were also at 5.25 per cent in 2007. The interest rate hike cycle was also very steep in 2007, but even faster and stronger in the years 2022 to 2023. Even now, insolvencies are rising sharply in the USA and also in Germany. More and more companies are getting into difficulties due to the high interest burden. Next year, over USD 2 trillion in US corporate bonds and US property loans will have to be rolled over or refinanced, which can lead to insolvencies if interest rates are too high,

Other factors such as geopolitical risks, which are then taken more seriously, are often added. So far, the major geopolitical risks, which could even lead to a third world war, have been criminally neglected on the stock markets. The Bloomberg Economic-Surprise Index, i.e. the deviations from expectations, is lower than it has been for a long time, which is also a warning signal.

FED often reacts too late to potential economic and financial crises

In the event of a bear market/crash, the Fed will once again be blamed in retrospect for leaving interest rates too high for too long and reacting too late to the economic slowdown. US interest rates are still far too high, which is now increasingly burdening companies, property owners and the state, which now has less and less money available to stimulate the economy.

Selinskyi urges NATO to escalate and cross ‘red lines’</strong

At the NATO conference in Ramstein, Ukrainian President Selinskyi vehemently called for the deployment of long-range missiles in order to be able to attack and damage Russia from now on. This would mean NATO crossing ‘red lines’ again and Putin’s response could become even more destructive and brutal. The potential for escalation is enormous. It is even possible that Belarus and Poland will soon be involved in the war.

To what extent was NATO involved in Ukraine’s invasion of the Kursk region?

Ukraine’s surprise invasion of the Kursk region would not have been possible without NATO’s help, including with reconnaissance, if this invasion had not been planned long ago by NATO (the USA) as a final lifeline. As a result, it is gradually becoming a war between NATO and Russia rather than just Ukraine and Russia. In Russia’s view, this has been the case for a long time anyway. The only question is where Putin’s pain threshold lies. Some military experts in Russia now want a pre-emptive nuclear strike against the USA in order to teach the USA a lesson. Nuclear-powered Russian warships are already stationed in Cuba. North Korea is ‘at the ready’ to help Russia in an emergency.

Russian soldiers are slowly advancing in the Donbas region, but they have suffered a surprising defeat in the Kursk region. The partially occupied Kursk region will now probably serve as a bargaining chip for Ukraine in the event of peace negotiations in the near future, which are now more urgently needed than ever before. The US professor Jefrey D. Sachs has long been calling for the USA to get ready for peace negotiations so as not to provoke a third world war.

However, the USA wants to use Ukraine to annoy and harm Russia for as long and as far as possible. Now even African countries that want to cooperate more with Russia than with the USA are to be penalised by law.

The war in Israel also seems to have no end in sight and is leading to a war in Lebanon, which could still become a conflagration in the Middle East if Iran becomes actively involved in the war. Joe Biden is failing to bring about a ceasefire. Thousands of Israelis are now demonstrating every day against the right-wing extremist government, which is failing to free more hostages or agree a ceasefire with Hamas.

Turkey wants to join the BRICS

Turkey, which now even wants to join the BRICS in October, could soon become more involved in the organisation. In addition to the monetary and economic challenges, there are also major geopolitical challenges that could tip the scales. Added to this is the BRICS Plus versus G7 dispute, which will be a major topic in Kazan (Russia) on 23 October, as Turkey wants to join the BRICS as a NATO member state. The planned de-dollarisation and liberation from US bondage will be a major topic there, which is likely to worry the US in the long term.

Is the AI hype coming to an end soon?

Despite the correction in September, we can still be very satisfied with the performance of the global stock markets and the crypto markets. The S&P Index is still up 14 per cent at 5,414 index points, while the NASDAQ Composite Index is ‘only’ up 13 per cent at 17,728 index points. The AI hype therefore seems to be gradually coming to an end despite the good figures for AI companies. In any case, there is still a lack of proof as to whether AI will really be profitable for companies other than those that produce AI chips or are suppliers for them. Shares such as Tesla already fell by 8 per cent to USD 210 on Friday and Nvidia by 3.4 per cent to USD 102. Electricity consumption will increase by 30 per cent over the next 10 years due to AI and cryptocurrencies. The question is whether there will be enough electricity and energy available.

Market technology for cryptocurrencies is struggling

Things also remain exciting for cryptocurrencies, which fell sharply again on Friday and are now in an explosive market situation. Cryptocurrencies such as Bitcoin and Ethereum often have a positive correlation with the NASDAQ, which has also been weaker recently. Bitcoin (BTC) fell by 4.3 per cent to 53,708 BTC/USD on Friday and Ethereum by as much as 6.9 per cent to 2214 ETH/USD. Both major cryptocurrencies recovered somewhat over the weekend. At below 49,000 BTC/USD, Bitcoin could even fall to 40,000 BTC/USD. Further lows could lead to a bear market or even a crypto crash in the short term. On the other hand, price recoveries are often very dynamic in a V-shape, as was also observed after 5 August. The big question is how AI shares and cryptocurrencies will perform if recessionary trends are confirmed. They are then likely to fall sharply, but this will not be a problem for ‘holders’.

Eastern European stock markets as clear outperformers of the DAX

In addition to gold, shares from the Balkan region also performed well in this negative environment. Shares from Serbia have even risen by 32.5 per cent since the beginning of the year and shares from Slovenia by 30 per cent. However, shares from Romania also pleased investors with an increase of 12 per cent. The SETX Index for shares from South Eastern Europe still rose by 17 per cent by 6 September and the CECE Banking Index for banks from Eastern Europe also rose by 17 per cent. Shares on the Budapest Stock Exchange have also surprised with an increase of 10 per cent in euros since the beginning of the year, outperforming the DAX with 9 per cent. 9 stock exchanges from Eastern Europe have already outperformed the DAX again.

Kiev stock exchange top performer worldwide

However, the Kiev Stock Exchange surprised the most with a gain of 39 per cent on the MSCI Ukraine Index. This made the Kiev stock exchange the world’s top performer after Argentina, despite the war, with the Merval Index up 73 per cent. Some investors seem to be betting on an imminent end to the war, which makes sense given the proverbial bombed-out prices, but shares from Georgia, where parliamentary elections will be held in October, are also rich in opportunities. The USA and the EU are now intervening on a massive scale in order to change the mind of the incumbent government regarding the law on agents. However, shares from Kazakhstan continued to make a lot of noise with a rise of 24 per cent in the KTX Local Index.

Freedom Broker offers market access to Kazakhstan

You can also buy shares from Kazakhstan directly online via the broker Freedom Finance from Cyprus, which has the advantage that you can quickly receive the sometimes very high dividends in your securities account. For example, Halyk Bank even has a dividend yield of 16% and a return on equity of 34%. At Freedom Broker you also receive interest on your savings account in USD of over 8% and in euros of over 6%. You can easily open an account online at the following link: https://freedom24.com/invite_from/2952896 If you need advice on exchanging Russian ADRs for original shares, Freedom Broker, which also has a branch in Berlin, is also the best place to go.

However, investors can still buy Russian ADRs at discount prices in the OTC market via Freedom Broker. Something similar is also possible via the broker Zerich Securities Ltd from Cyprus if you open an account via the following link: https://trade.mind-money.eu A list of tradable Russian ADR is published in the stock market letter EAST STOCK TRENDS (www.eaststock.de). Both brokers also offer participation in lucrative IPOs on Wall Street as well as high returns on overnight and fixed-term deposits.

Inform first, then invest

Find out more now about the background and development of the Ukraine/Russia crisis as well as the future recovery potential of undervalued shares from Eastern Europe. There are also new opportunities in the Baltics, Southeast Europe and the CIS republics (Kazakhstan, Georgia), with the respective share indices all up in 2023. In 2023, 12 stock exchanges from Eastern Europe were among the 30 best-performing stock markets in the world, with 5 clearly outperforming the DAX. In 2024, 9 stock exchanges from Eastern Europe outperformed again with a strong gain. It is therefore still worth looking beyond the horizon to Eastern Europe.

Order a trial subscription now (3 issues by e-mail for just €15) to the monthly stock market letter EAST STOCK TRENDS (EST) with another Ukraine/Kazakhstan/Russia special and a dividend special as well as lots of background information and new investment suggestions such as the ‘Stock of the Month’ and lucrative certificates at www.eaststock.de, under Stock Market Letter. The last EST was published on 21 August 2024.

TV/radio notes: On 5 February 2024, Andreas Männicke was interviewed by Carola Ferstl on Money Talk about gold, commodities and the new opportunities in Eastern Europe. You can download all radio and TV interviews from the video archive at www.eaststock.de, including the last video in EastStockTV, episode 236. By the way: have you already subscribed to the YouTube channel EastStockTV ?

If you are interested in new EastStock seminars ‘Go East’ in Frankfurt/M or other cities, please contact the EST editorial team (www.eaststock.de )

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