Tsvetoslav Tsachev, chief investment consultant ELANA Trading, “Investor Club”, 30.09.2023
21:05 | September 30, 2023
Author: Daniel Nikolov
The declines in global indices over the past month have been caused by the sell-off that began in August, with the “pseudo-correction” driven by small companies. The market pressure is also due to the bond market rethinking that rate hikes are not over. The price of oil is rising because production is lagging significantly, with jobs in the US oil sector at their lowest level in decades. This was commented by Tsvetoslav Tsachev, chief investment consultant of ELANA Trading, on the air of the program “Investor Club” with presenter Ivaylo Lakov.
“This is the policy of the administration now – to leave oil very much in the background. None of the big companies want to invest – the investments are going into the green economy, and oil has to be consumed because there is not much change in demand. In globally, the change in demand is up, but production is failing to compensate.”
There is a shortfall that is estimated to be at least 1 million barrels per day from the beginning of 2023, and to this must be added the reduction in Saudi Arabia’s production by about 2 million barrels and Russia by about 0.5 million. This deficit will soon lead to triple-digit oil prices, which “will become the normal and the usual, as even the Americans decided not to fill the strategic oil reserve (SPR) from which they sold last year,” Tsachev said. If the US decides to fill the SPR, it could add another 1 million bpd to demand and further push up the price.
Commenting on the real estate crisis in China and the problems of the construction giant Evergrande, Tsachev emphasized the high price growth in the country, which creates problems like those in developed countries and Bulgaria.
“In reality, prices are rising ten or twelve times in the biggest cities in twenty years. This is an extremely high price increase and it is a problem for the whole world,” as housing becomes difficult to afford for the population.
Apple shares did not react particularly strongly to the presentation of the new iPhone 15, but did not disappoint the market, which would trigger a bigger sell-off in the technology sector and have an effect on the broader indices, Tsachev said.
“What we don’t see in the correction right now is exactly that kind of flight of money out of exchange-traded funds — that the average American who invests that way will start pulling money out and moving it into bonds. That would be the difference between a correction to 10% – it hasn’t happened yet – to go to 20%-25% and be a deeper decline. There are worries about a recession, but not that strong.”
Betting on AI tools by major companies is also supporting the market and supporting their share prices amid a slump in the transportation sector and reduced consumption, Tsachev said. This creates the conditions for not so much a soft landing, but a milder recession.
“The question is when will the Federal Reserve cut interest rates. If they do it prematurely and more strongly, … we could see in 2024-2025 very strong growth in stocks, especially in technology, to go beyond any fundamental.”
How the bond market is performing, what is happening with gold and bitcoin you can watch in the video.
The conversation is not a prerequisite for making an investment decision.
All the guests of the show “Investor Club” can be found here.
2023-09-30 18:05:00
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