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Ukraine-Russia Peace Deal?

Ukraine-Russia Peace Deal?

As I write this, the S&P 500 and Nasdaq futures contracts are up more 2% before the opening bell, and the market should open strongly higher.

If you read CNBC's website or check the other news pages, the reason is given as "easing commodity prices" - oil is down about 4% to $118/barrel. Wheat, silver, copper and platinum were all lower in overnight trading as well.

But why would commodity prices be down, and stock market futures up so much?

My hunch?

Ukraine and Russia are working out a peace agreement.

As the Jerusalem Post has noted in recent days, Israel prime minister Naftali Bennett has been acting as a go-between, first talking to Ukraine's Zelensky, then flying to Moscow to meet with Putin.

https://www.jpost.com/international/article-700677

It sounds like the particulars of the deal - Ukraine being or not being a part of NATO in the future, a guarantee of Ukraine's independence, the status of contested regions like Donbas and Donetsk, - are still being negotiated. I won't attempt to go into the geopolitical considerations or how it all plays out.

But if there's a peace deal, lots of things could change very quickly...

  • Oil prices could crater further, back below $100.
  • The "rising inflation" narrative takes a backseat as energy and commodity prices have deep months-long pullback.
  • Western democracies enjoy a moment of solidarity in meeting a threat to the global order.

As I always say, the stock market anticipates future events.

So it's quite possible that long before the headlines confirm a Russia-Ukraine peace deal - in a day, a week, or a month from now - the stock market could already be quite a bit higher.

And the reasons for the correction/bear market we're struggling through now - rising inflation, high energy prices, global turmoil - could go from "high heat" to "low simmer" - and allow the major stock indexes to be sharply higher in coming months.

Best of goodBUYs,

Jeff Yastine