How Is The Market Shifting Trading Liquidity?

Posted by Klejdi Cuni on

The first phase:
With the start of the war between Russia and Ukraine, we saw that the market shifted liquidity mainly to safe currencies, USD, CHF, JPY and Gold, OIL (metals in general).
This is a normal scenario that usually happens.

The shift of stock liquidity:
In a war event like the one we are already experiencing between Russia and Ukraine, we all know that the first companies to benefit are the guns and ammunition companies, the Aerospace, and the defense sector in general, etc. The war will require high resources if it escalates further, so these companies are the first to benefit from this situation. So consequently their stock price tends to rise quickly.

2. Given the fact that Russia is one of the largest exporters of oil and gas in the world, this topic would be the second issue.
Here we have the second sector that increases the value of their stocks, "Oil & Gas Integrated", "Oil & Gas Midstream". So everything related to the production, distribution, and services of oil and gas.

Phase 2
As long as Europe is very close to war the eyes of the market are on it.
Free liquidity has shifted to countries far away from Europe that is safer and not economically connected to Russia. Money moved to Australian Dollar (AUD) and New Zealand Dollar (NZD)

Also the governor of Japan in a press conference last week said that they can be affected by the European economy as they have close business relations. Is that true?

Japan does not want their currency to be too strong as they lose in exporting their goods. So here it comes ... JPY starts depreciating by losing ground as a safe haven currency.

We also have a Swiss bank that is preparing to intervene and also stop the strength of the CHF.

Other economies are trying to do the same through interest rates. Some of them want to raise interest rates due to rapid and large devaluation. 
Some others want to weaken their currencies so as not to hurt exports of goods.

Phase 3
Close all your foreign exchange profits and stock investments as the market has already absorbed the war and the economic problems associated with it. 

Financial institutions will want to close the profits on their investments as the stock price will not rise indefinitely.
It is the same situation as with pharmaceutical companies during pandemics.
Once Wallstreet players leave the market, then you are alone. So be smart and do not be greedy in these situations.

Phase 4
We will now stage the real economic crisis and the inflationary pressure that is happening.
So now you need to think about the next sectors where you can invest and benefit from the coming events.

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