Dear Outsider,
Last week, the stock market was as volatile as ever.
Even crypto had violent swings that would make your head spin.
And then Wednesday, something big happened and stocks responded positively.
For the first time since the Russian invasion of Ukraine over a year ago, Chinese President Xi Jinping and Ukrainian President Volodymyr Zelenskyy held a phone call.
According to the BBC, Zelenskyy reportedly said the call was "long and meaningful."
It makes you wonder...
Is the Russia-Ukraine War coming to a close soon?
And if it does, how will the stock market react?
In late February, the Ministry of Foreign Affairs of the People's Republic of China released a 12-step plan to end the war. The plan includes respecting the sovereignty of all countries, abandoning the Cold War mentality, ceasing hostilities, and facilitating grain exports.
Could this be the beginning of peace talks?
It's probably too soon to know.
The China-Ukraine phone call sounds good on paper, but experts are skeptical of China's intentions and ability to broker a peace deal. As The New York Times reported, "China has grown particularly close with Russia and shares the Kremlin's goal of upending a world order dominated by the United States and its allies. American officials have said they believe Beijing has seriously considered sending military aid to Moscow for its war."
Now it looks like China has no intention of doing that. Before the war, China and Ukraine were getting close. China was the largest importer of Ukrainian barley, corn, and iron ore. Not to mention Ukraine was a top supplier of arms to China. But Russia's become reliant on China since the war. According to Chinese customs data, in 2022, Russia exported over $110 billion worth of goods to China, an increase of more than $30 billion over the previous year. Russia might be worried about the economic blowback if China steps in.
For proof that Russia may be running out of options, it's taken to crank-calling high-ranking officials. According to Bloomberg, Russian hoaxsters posing as Zelenskyy successfully held a phone call with Fed Chair Jerome Powell during which they talked about the economy and other matters. Someone over at the Fed finally spilled the beans this week that "Chair Powell participated in a conversation in January with someone who misrepresented himself as the Ukrainian president... It was a friendly conversation and took place in a context of our standing in support of the Ukrainian people in this challenging time. No sensitive or confidential information was discussed."
Let's hope that's true. I think a lot of us would like to have a conversation with Powell right now.
And if the war comes to and end, based on historical data, U.S. stocks would likely soar.
Stocks perked up after the China-Ukraine phone call and rose nearly 3% across the board in the following days.
So if that's any indication of how stocks will do once the war is over, I'd say they'll go to the moon but then drift back down.