Financial markets never lose the capacity to surprise.

Despite a major land war in Europe, powerful sanctions and a pandemic straining supply chains and fracturing markets and central banks around the world raising interest rates and tightening financial conditions, US stock markets had a great week.

In fact, they had more than a great week, by nearly any standards. The landmark index of large US companies had four straight 1%+ returns from Tuesday through Friday.

This was practically historic. It was also unusual!

Going back to 1950 such a run of strong returns has only happened on 5 other occasions.

More importantly, in 4 of the 5 occasions they came very close to signaling that the bottom was "in." Or that the stock market selloff was complete, short term.

The dates?

1. June-July 1962

2. July 1970

3. October 1974

4. October 1982

The only exception? November of 2020, shortly before the US Presidential election when excitement about the high probability of Joe Biden's election and for what might be termed a different approach to governing, the US constitution and the American way of life gave markets a sustained lift.

So, what about now?

Well, as usual, past performance is never a predictor of future returns.

But in each case above, stock market returns were positive 3, 6, 9 and 12 months out from the last date of the bounce. In all but one case (the 1970 analogue) they were positive 1 month after.

And there are any number of positive signs about both the pandemic and the US economy though it is difficult to really give credence to the diplomacy in Ukraine while many innocent civilians are being bombed and murdered daily.

The most positive signals might have come out of China:

• Xi Jinping having a lengthy and hopefully productive conversation with President Biden was a good sign that China's leader may want to curtail the economic fallout from the war and also pandemic-related disruptions.

• Further, China announcing that it would "support the economy" and directly trying to alleviate investors concerns reversed weeks of terrible performance.

We will return to this topic in a future week but for now China's approach will be critical to monitor carefully. If the China changes course on the pandemic and supporting economic growth that would be a major shift globally.

Elsewhere, when it comes to major risks we should probably turn to the alternate "big" fear at present - other than Vladimir Putin's seeming determination to bring the "politics of blood and iron" back into the 21st century, of course.

Yes, it is finally time to formally talk about the risk of an economic recession.

*******

Have questions? Care to find out more? Feel free to reach out at contact@pebble.finance or join our Slack community to meet more like-minded individuals and see what we are talking about today. All are welcome.