Markets are still extremely volatile. Investor sentiment is highly vulnerable to any rumors and news, as well as macroeconomic statistics.

The events of the past week fully corroborate this thesis. On the one hand, market participants realize that stocks are extremely oversold, and expectations of the Fed's series of aggressive interest rate hikes have already been priced in. Besides, China's central bank cut its benchmark reference rate for mortgages by an unexpectedly wide margin on Friday, which was regarded by investors as a positive, stimulating factor. On the other hand, the risk of an unprecedented economic downturn in the United States, Europe, and other regions acts as a strong limiting factor, which is putting pressure on the markets and making volatility tick higher.

Thus, it can be assumed that markets are no longer afraid of Fed rate hikes but of a recession, in particular in the United States. Why?

An important signal is the reaction of the US government debt market. Earlier, when the US Federal Reserve just started the process of interest rate increases, and amid growing expectations of the regulator's aggressive moves, the yields of these assets posted strong gains on the wave of bond sales. However, two weeks ago, the US Treasury market was in a bullish trend. The situation is completely different. For the last two weeks, US Treasury yields have been declining on purchases of these securities.

The reason is fears of recession not only in the United States, but throughout the world. A significant influx of capital into the US is precisely what creates such a dynamic in the bond market. Investors, which are states, companies, and individuals, are ready to lose part of their capital on negative Treasury yields in the face of a possible global economic downturn. This is also due to the fact that there are currently no assets that would allow them to wait out market turbulence and looming recession against the backdrop of stagflation.

Even gold, which is commonly considered to be a safe-haven asset, has been weighed down by a stronger dollar.

What to expect this week?

We believe that markets will remain volatile for the most part. However, there is also a likelihood that stock indices will try to partially recover amid attempts to stay firm at current levels. Some improvement in sentiment will lead to higher demand for commodity and commodity-based assets, while the US dollar will come under pressure.