<h2 id="h-topline">TOPLINE</h2>



Several Wall Street experts are warning that despite moving higher in recent weeks, the stock market still has further to fall—with recent gains likely to be nothing more than a “bear market rally,” as investor concerns about Fed rate hikes and slowing economic growth continue to weigh on markets.



<h2>KEY FACTS</h2>



Despite an earnings season marked by profit warnings from major companies, the stock market has risen significantly from its low point on June 16, with the S&amp;P 500 gaining roughly 12% and rallying for the last three weeks in a row.&nbsp;



With stocks starting to recover from a brutal selloff in the first half of the year, investors are now debating whether recent gains are merely a bear market rally—with stocks set to hit new lows—or the start of a new bull market.



Analysts at Bank of America argue that it’s “premature to declare a ‘big low’ in the market,” predicting more downside ahead and advising investors to remain “tactically cautious,” especially as the Federal Reserve continues to hike interest rates for the foreseeable future.



The firm describes that many traditional indicators of a market bottom are yet to be triggered—such as rising unemployment, the Federal Reserve starting to lower interest rates, a slowdown in profit estimates and a decline in the two-year Treasury yield.



What’s more, the last three market lows occurred after investors began to sell stocks, which hasn&#8217;t happened just yet: Since the end of June, clients have been net buyers of equities rather than sellers, according to Bank of America.



The unexpectedly&nbsp;<a href="https://www.forbes.com/sites/sergeiklebnikov/2022/08/05/stocks-fall-despite-strong-jobs-report-as-investors-fear-bigger-fed-rate-hikes/">strong jobs report</a>&nbsp;last Friday, which investors worry will embolden the Fed to continue aggressively raising rates, also signals that the “recent bear market rally” will soon come to an end, according to LPL chief global strategist Quincy Krosby.



<h2>WHAT TO WATCH FOR:</h2>



The optimism about inflation peaking and a looming “Fed pivot”—where the central bank pulls back from its aggressive tightening of monetary policy—is certainly “<a href="https://www.forbes.com/sites/sergeiklebnikov/2022/08/02/heres-why-more-fed-officials-are-warning-that-the-market-is-getting-ahead-of-itself/?sh=56e9a86833d1">overdone</a>,” while “nonsensical behaviors” are also returning to the market, according to Vital Knowledge founder Adam Crisafulli. Both factors should “temper” investors’ near-term enthusiasm as they suggest further downside risks—though on the bright side, the U.S. economy is proving “more resilient than it’s being given credit for.”



<h2>CRUCIAL QUOTE:</h2>



“Investors are increasingly in a game of tug-of-war over bullish and bearish talking points,” says Nationwide chief of investment research Mark Hackett. “Confusion is driving investor decisions,” which generally leads to “directionless volatility,” he warns.



<h2>TANGENT:</h2>



What can investors do if the market does hit new lows? “Use bear market rallies to raise cash and rotate into higher quality assets,” according to analysts at Bank of America. “Keep dividend and bond coupon reinvestments paused and use tax-loss harvesting techniques ahead of better buying opportunities this year.”



<h2>FURTHER READING:</h2>



<a href="https://www.forbes.com/sites/sergeiklebnikov/2022/08/05/stocks-fall-despite-strong-jobs-report-as-investors-fear-bigger-fed-rate-hikes/">Stocks Under Pressure Despite Strong Jobs Report As Investors Fear Bigger Fed Rate Hikes</a>&nbsp;(Forbes)



<a href="https://www.forbes.com/sites/sergeiklebnikov/2022/08/02/heres-why-more-fed-officials-are-warning-that-the-market-is-getting-ahead-of-itself/">Here’s Why More Fed Officials Are Warning That The Market Is Getting Ahead Of Itself</a>&nbsp;(Forbes)



<a href="https://www.forbes.com/sites/sergeiklebnikov/2022/08/08/bed-bath--beyond-surges-nearly-40-as-retail-traders-pile-back-into-meme-stocks/">Bed Bath &amp; Beyond Surges Nearly 40% As Retail Traders Pile Back Into Meme Stocks</a>&nbsp;(Forbes)



<a href="https://www.forbes.com/sites/sergeiklebnikov/2022/08/03/dow-jumps-400-points-as-stocks-rebound-thanks-to-solid-earnings-upbeat-economic-data/">Dow Jumps 400 Points As Stocks Rebound Thanks To Solid Earnings, Upbeat Economic Data</a>&nbsp;(Forbes)



By Sergei Klebnikov, Forbes Staff

New York Stock Exchange Opens To Begin The Week

Some Experts Are Warning Of A ‘Bear Market Rally’—Here’s Why Stocks Could Hit New Lows

<h2 id="h-topline">TOPLINE</h2>



Global stock indexes and major cryptocurrencies dived on Thursday while commodities like oil and precious metals rallied as Russia’s&nbsp;<a href="https://www.forbes.com/sites/joewalsh/2022/02/23/russia-orders-special-military-operation-in-ukraine/?sh=72e111fc2321">invasion</a>&nbsp;of Ukraine sent shockwaves through international markets.&nbsp;



<h2 id="h-key-facts">KEY FACTS</h2>



European stocks tumbled as markets opened on Thursday morning, with key indexes including London’s FTSE 100 down 2.46%, Germany’s Dax 3.48%, France&#8217;s CAC40 3.01%, Spain’s Ibex 2.58%, Euronext 100 2.62% and Euro Stoxx 50 3.37%.



The slump mirrors falling stocks in the Asia Pacific region Thursday, with Japan’s Nikkei down 1.81%, Hong Kong’s Hang Seng 3.21%, Australia’s All Ordinaries 2.95% and Shanghai’s Composite 1.70%.&nbsp;&nbsp;&nbsp;



U.S. markets are on a similar path for when markets open, with the Dow down 1.38% in pre-market trading, Nasdaq 2.57% and S&amp;P 500 1.84%, with the latter&nbsp;<a href="https://www.forbes.com/sites/sergeiklebnikov/2022/02/23/sp-500-falls-deeper-into-correction-territory-as-ukraine-declares-state-of-emergency/?sh=793035b35e67">continuing</a>&nbsp;a days-long downwards trend.



The Moscow stock exchange, which uses the Russian ruble, suspended all trading Thursday amid enormous volatility in the currency and benchmark index MOEX was down nearly 40%.



Oil prices, meanwhile, jumped past $100 a barrel with the highest prices since 2014—Brent crude rose nearly 7% to $103 a barrel—and safe haven&nbsp;<a href="https://www.reuters.com/markets/europe/gold-rises-escalating-ukraine-crisis-spurs-safe-haven-bids-2022-02-24/" target="_blank" rel="noreferrer noopener">assets</a>&nbsp;like gold, silver platinum and palladium grew between 1.5% and 3%.&nbsp;&nbsp;&nbsp;&nbsp;



Major cryptocurrencies also crashed in the wake of the invasion, with&nbsp;<a href="https://www.forbes.com/digital-assets/assets/bitcoin-btc/?sh=23274a6d4357">bitcoin</a>&nbsp;<a href="https://www.forbes.com/sites/siladityaray/2022/02/23/bitcoin-falls-below-35000-as-putin-orders-military-operation-in-ukraine/?sh=56d6315f4a3a">down 8%</a>&nbsp;in the last 24 hours,&nbsp;<a href="https://www.forbes.com/digital-assets/assets/ether-eth/?sh=6457a2717b0e">ether 12%</a>, Binance’s&nbsp;<a href="https://www.forbes.com/digital-assets/assets/binance-coin-bnb/?sh=6b8afc44ae78">BNB 11%</a>&nbsp;and&nbsp;<a href="https://www.forbes.com/digital-assets/assets/ripple-xrp/?sh=38a7ebe1535a">Ripple’s XRP 13%</a>.&nbsp;&nbsp;



<h2 id="h-what-to-watch-for">WHAT TO WATCH FOR</h2>



More sanctions. World leaders have&nbsp;<a href="https://www.forbes.com/sites/dereksaul/2022/02/23/russia-sanctions-tracker-first-barrage-of-penalties-span-japan-to-us/?sh=3379f45c149a">already imposed fresh sanctions</a>&nbsp;on Russian banks, lawmakers and oligarchs and President Joe Biden warned Thursdays’ G7 meeting would yield more “<a href="https://www.forbes.com/sites/siladityaray/2022/02/24/russias-invasion-of-ukraine-draws-international-condemnation-and-threats-of-more-sanctions/?sh=3f2fd15c7b3b">severe sanctions</a>’ on Russia.&nbsp; The sanctions—which could be severe given the scale of Russia’s incursion—could cripple Russia’s economy and bar it from key markets. European&nbsp;<a href="https://www.politico.eu/article/eu-russia-new-sanctions-package-ukraine/" target="_blank" rel="noreferrer noopener">leaders</a>&nbsp;have already scheduled an emergency meeting to discuss the measures on Thursday evening.&nbsp;



<h2 id="h-further-reading">FURTHER READING</h2>



<a href="https://www.forbes.com/sites/siladityaray/2022/02/24/russias-invasion-of-ukraine-draws-international-condemnation-and-threats-of-more-sanctions/?sh=3f2fd15c7b3b">Russia’s Invasion Of Ukraine Draws International Condemnation And Threats Of More Sanctions</a>&nbsp;(Forbes)



<a href="https://www.forbes.com/sites/joewalsh/2022/02/23/russia-orders-special-military-operation-in-ukraine/?sh=72e111fc2321">Russia Orders ‘Special Military Operation’ In Ukraine</a> (Forbes)



By <a href="https://www.forbes.com/sites/roberthart/"></a>Robert Hart, Forbes Staff

Oil Prices Moving Down

Global Stocks Plummet And Oil Soars As Russia Invades Ukraine

<h2 id="h-topline">TOPLINE</h2>



The stock market plunged earlier today—with the S&amp;P 500 briefly falling into correction territory—before rebounding in volatile trading as investors worry about rising interest rates and await a key policy meeting from the Federal Reserve later this week.



<h2>KEY FACTS</h2>



The Dow Jones Industrial Average rose 0.3%, nearly 100 points, while the S&amp;P 500 gained 0.3% and the tech-heavy Nasdaq Composite 0.6%.



The benchmark S&amp;P 500 index, which is on track for its worst January performance ever, at one point hit correction territory, down more than 10% from its record high at the start of 2022.



Stocks staged a dramatic rebound late in the day, with all three major indexes turning positive: Earlier on Monday, the Dow fell as much as 1,000 points, while the S&amp;P 500 was down nearly 4% and the Nasdaq around 5%.



Investors continue to remain concerned about surging interest rates and are now looking ahead to the Federal Reserve’s upcoming policy meeting, which wraps up on Wednesday.



Most experts don’t expect the Fed to take any significant actions at this meeting, but the central bank will likely set up the first of multiple interest rate hikes beginning in March while also concluding its monthly bond purchase program.



What’s more, the fourth-quarter earnings season has so far been mixed: Although more than 74% of S&amp;P 500 companies that have reported results topped Wall Street estimates, some big names including Netflix and Goldman Sachs saw lackluster earnings.



<h2>WHAT TO WATCH FOR:</h2>



Shares of big tech companies, which have remained under pressure in recent weeks, were mixed on Monday. Shares of Netflix were down another 2.6%, after plunging more than 20% last Friday on the back of disappointing quarterly earnings. Other big names including Tesla and Apple, which both report earnings this week, each fell around 1.5% on Monday.



<h2>SURPRISING FACT:</h2>



The CBOE Volatility Index (VIX), which measures market volatility, hit its highest level in nearly 12 months, surging over 37 on Monday morning. Both the Dow and S&amp;P 500 are on pace for their worst month since March 2020, when the U.S. economy fell into a recession during coronavirus pandemic shutdowns. The Nasdaq, meanwhile, is down over 10% in January, which could be its worst month since the financial crisis in October 2008.



<h2>CRUCIAL QUOTE:</h2>



Stocks were getting “slaughtered, and panic is setting in,” says Vital Knowledge founder Adam Crisafulli in a recent note. “What had initially been a stimulus withdrawal-driven decline morphed last week to include earnings jitters.”



<h2>KEY BACKGROUND:</h2>



Monday’s losses follow what has already been a brutal selloff on Wall Street this month. With tech stocks under huge selling pressure, the Nasdaq was the first index to&nbsp;<a href="https://www.forbes.com/sites/sergeiklebnikov/2022/01/21/netflix-stock-crashes-as-nasdaq-has-worst-week-since-october-2020/?sh=568a0eb21d77">hit correction territory</a>&nbsp;last week, now down around 15% from its record highs last November.



<h2>FURTHER READING:</h2>



<a href="https://www.forbes.com/sites/sergeiklebnikov/2022/01/21/netflix-stock-crashes-as-nasdaq-has-worst-week-since-october-2020/">Netflix Stock Crashes As Nasdaq Has Worst Week Since October 2020</a>&nbsp;(Forbes)



<a href="https://www.forbes.com/sites/jonathanponciano/2022/01/24/catastrophic-stock-market-crash-isnt-over-heres-how-much-worse-it-could-get/">&#8216;Catastrophic&#8217; Stock Market Crash Isn&#8217;t Over—Here&#8217;s How Much Worse It Could Get</a>&nbsp;(Forbes)



<a href="https://www.forbes.com/sites/sergeiklebnikov/2022/01/21/pandemic-darling-no-more-pelotons-dramatic-crash-in-4-charts/">Pandemic Darling No More: Peloton’s Dramatic Crash In 4 Charts</a>&nbsp;(Forbes)



<a href="https://www.forbes.com/sites/sergeiklebnikov/2022/01/19/robinhoods-struggles-continue-its-cofounders-are-no-longer-billionaires-shares-down-60-since-ipo/">Robinhood’s Struggles Continue: Its Cofounders Are No Longer Billionaires, Shares Down 60% Since IPO</a> (Forbes)



By Sergei Klebnikov, Forbes Staff

A smartphone displays the S&P 500 market value on the stock

Stock Market ‘Panic Is Setting In’ As S&P 500 Briefly Enters Correction Territory Then Rebounds

This is an excerpt from Deal Flow, Forbes’ daily newsletter about big buyouts, big mergers and the rest of Big Finance. Want a new edition in your inbox every afternoon? <a href="https://www.forbes.com/newsletter/dealflow/">Subscribe here</a>.



After a record-breaking year for IPOs in 2021, the pipeline for 2022 is already filling up. Chime, Instacart, Reddit and Stripe are just <a href="https://www.forbes.com/sites/jonathanponciano/2022/01/03/the-biggest-ipos-to-watch-in-2022-reddit-trump-spac-tpg">a few of the hugely valuable startups</a> that could finally take the leap from private to public. TPG is ready to get the party started next week, with a public debut on the docket that could value the private equity firm at nearly $10 billion.



The big names will be there. But what about the rest of the IPO landscape? Will the good times continue to roll, and more records continue to fall? Or will escalating inflation and the potential for rising interest rates cause things to take a bearish turn?



I spoke this week with&nbsp;Rachel Gerring, who works as the Americas IPO leader at&nbsp;EY, to take the temperature of the market as a new year gets underway.



There were nearly 400 IPOs in the U.S. last year that combined to raise more than $142 billion in proceeds, according to data from the IPO watchers at Renaissance Capital. Both of those figures easily outpace any other year since the dot-com boom. Gerring and other experts have highlighted several factors that helped create such fertile ground for debutantes. Between a flood of government stimulus spending, soaring public valuations, a backlog of companies from 2020, low interest rates and the optimism of vaccine rollouts, the past 12 months were something close to a perfect storm.



In the year ahead, though, the forecast looks a little different.



“I’m starting to see some headwinds,” Gerring said.



As one major example, Gerring pointed to the growing likelihood that the Federal Reserve&nbsp;<a href="https://www.wsj.com/articles/fed-minutes-reflect-growing-unease-over-high-inflation-11641409628" target="_blank" rel="noreferrer noopener">will raise interest rates</a>&nbsp;in the months to come. Part of the public market’s runaway success in 2021 was driven by investors seeking better returns than they might find in fixed-income markets. If higher rates make those fixed-income investments start to look a little more appealing, that could sap some of the public market’s juice.



The pandemic continues, but at this point, it seems like the spigot of stimulus funding has been shut off for good. Plans to move back to the office have been again delayed by the omicron variant, perhaps sparking new pessimism. Many companies are struggling to retain top talent. Add it all up, and Gerring thinks it’s unlikely that public valuations will continue climbing to ever-loftier levels in the months to come.



Last year, it seemed like the IPO window never closed. This year, timing may be of the essence.



“Companies really need to continue planning, because they need to look for and be able to respond to the appropriate market openings when those moments occur that are right for them,” Gerring said. “So, to me, that just continues to put the pressure and focus around planning and planning in advance. Because I think in ’22, as we sit here today, there’s a lot of uncertainty.&#8221;



The tech and healthcare sectors were particular hotspots for IPO activity last year. Gerring thinks that will remain the case in the months to come. Indeed, three of the four public offerings that occurred in the U.S. during this past week involved healthcare companies. The EY executive said she’s also keeping a close eye on the industrials sector, where a new infrastructure bill could lead to an influx of spending, and the travel and leisure industries, which could see another surge of interest when the omicron variant begins to fade.



These days, when you talk about IPOs, you can’t only talk about IPOs. The market for SPAC deals has faded considerably from a peak that occurred around this time last year. But it remains a major exit option, with nearly 200 blank-check mergers completed last year, per the website SPAC Research.



“You know, Q1 2021 was out of this world,” Gerring said of the SPAC market. “We’re not going to see numbers like that, but they’re certainly not going away, either.&#8221;



It’s easy to think of SPAC deals as true alternatives to IPOs. In one sense, that’s accurate. But in another, not so much. As last year progressed, it became clear that blank-check mergers were better-suited to certain types of companies, ones that were more about promises of a game-changing future than any existing track record. We’re talking about electric vehicle makers, rocket-launch specialists, upstart crypto exchanges—the sorts of companies that lack the established financial history that IPO investors tend to prefer.



“That’s one area where we spend a good amount of time, discussing with companies the differences,” Gerring said. “There are multiple paths of accessing the public markets. What’s the best path for each individual company? I’m not suggesting one is better than the other. It’s more around, what’s better in the sense of accomplishing the company’s and their owner group’s objectives?&#8221;



For most of the biggest names—the Reddits and Instacarts and TPGs of the world—the objective still remains an IPO. Some of those companies have been planning their public debuts for several years now, spurred by last year’s ebullience to finally make the leap. Will they still proceed with their listings if the market begins to fade? It’s impossible to predict with much certainty. But Gerring believes a more bullish IPO environment will have a bigger effect on smaller companies. When it comes to the market’s reception, some companies have the ability to create their own weather.



“Are they impacted by some of those headwinds? Yes. To the same degree? Maybe not,” Gerring said. “We’ve always felt that there will be those market openings, those market windows that provide a more optimal time. But for companies that are well-prepared and have been really thoughtful around their approach to their IPO or public listing, I think there will always be a market.&#8221;



Just how friendly will that market be in 2022? The planned TPG IPO in the days to come should offer our first real glimpse.



By Kevin Dowd, Forbes Staff

Market Analyze with Digital Monitor focus on tip of finger.

Rising Interest Rates Could Bring The IPO Market Back To Earth After A Record-Breaking 2021

Topline:&nbsp;Following his annual letter to Berkshire Hathaway shareholders over the weekend, billionaire investor Warren Buffett told CNBC in an&nbsp;<a href="https://www.cnbc.com/2020/02/24/warren-buffet-interview-live-updates.html" target="_blank" rel="noreferrer noopener">interview</a>&nbsp;on Monday that the coronavirus is “scary stuff” for businesses and investors, but that the outbreak has “not changed” his long-term optimistic outlook on stocks.



<ul><li>Stocks plunged on Monday, with all three major U.S. benchmark indexes <a href="https://www.forbes.com/sites/sergeiklebnikov/2020/02/24/markets-plunge-dow-drops-900-points-as-global-coronavirus-outbreak-worsens/#353cf5f46658">losing more than 3%</a>, as a rising number of coronavirus cases outside of China stoked fears that the outbreak could turn into a global pandemic.</li><li>Speaking with CNBC on Monday morning, Buffett <a rel="noreferrer noopener" href="https://www.reuters.com/article/us-berkshire-buffett/warren-buffett-calls-coronavirus-outbreak-scary-stuff-but-says-he-wont-be-selling-stocks-idUSKCN20I1AB" target="_blank">called</a> the coronavirus “scary stuff,” saying that the outbreak is now “front and center” the main threat to U.S. companies and the economy.</li><li>He further <a rel="noreferrer noopener" href="https://www.cnbc.com/2020/02/24/warren-buffett-says-us-economy-is-strong-but-a-little-softer-than-it-was-6-months-ago.html" target="_blank">warned</a> that a “very significant percentage” of Berkshire Hathaway’s businesses—it owns more than 90, from American Express and Coca-Cola to Geico and Dairy Queen—could “very well” be negatively impacted by the coronavirus, though he remains optimistic about their long-term prospects.</li><li>More broadly, Buffett said that the U.S. economy is <a rel="noreferrer noopener" href="https://www.cnbc.com/2020/02/24/warren-buffett-says-us-economy-is-strong-but-a-little-softer-than-it-was-6-months-ago.html" target="_blank">still “strong,”</a> though it had become “a little softer” than it was six months ago: “Business is down but it’s down from a very good level,” he described. </li><li>Despite the coronavirus’ impact on markets, Buffett, who is famous for his long-term  investing, <a rel="noreferrer noopener" href="https://www.cnbc.com/2020/02/24/warren-buffett-doesnt-worry-how-current-events-will-affect-the-market.html" target="_blank">said</a> that investors shouldn’t panic by selling stocks based or get caught up in “today’s headlines.” </li><li>The Oracle of Omaha actually sees a positive in the ongoing market sell-off, <a rel="noreferrer noopener" href="https://www.cnbc.com/2020/02/24/warren-buffet-interview-live-updates.html" target="_blank">telling</a> CNBC that Berkshire Hathaway would “certainly be more inclined” to buy stocks at the lower prices caused by the coronavirus.</li></ul>



 What to watch for: Buffett also <a rel="noreferrer noopener" href="https://www.cnbc.com/2020/02/24/warren-buffett-says-apple-is-probably-the-best-business-i-know-in-the-world.html" target="_blank">spoke</a> to CNBC about some of his favorite investments right now. He called Apple, which is Berkshire Hathaway’s third-largest holding (with a roughly 5.5% stake) behind insurance and railroad companies, “probably the best business I know in the world.” Buffett added that he especially likes bank stocks, which are a big part of Berkshire Hathaway’s portfolio—with big names like Goldman Sachs, JPMorgan Chase and Bank of America among its top holdings. Buffett <a rel="noreferrer noopener" href="https://www.cnbc.com/2020/02/24/warren-buffet-interview-live-updates.html" target="_blank">called</a> banks “very attractive compared to most other securities I see.”  



Surprising fact:&nbsp;Buffett also recently spoke about the coronavirus to his “science advisor,” billionaire Microsoft founder Bill Gates: “I talked to him in the last few days about it, and he’s bullish on the long-term outlook for a universal prevention of it,” he&nbsp;<a href="https://www.cnbc.com/2020/02/24/warren-buffet-interview-live-updates.html" target="_blank" rel="noreferrer noopener">said</a>.



Crucial quote: “We’re buying businesses to own for 20 or 30 years,” Buffett, who Forbes estimates has a <a href="https://www.forbes.com/profile/warren-buffett/#3a87d5e14639">net worth</a> of $87.3 billion, <a rel="noreferrer noopener" href="https://www.cnbc.com/2020/02/24/warren-buffet-interview-live-updates.html" target="_blank">said</a> on CNBC. “We think the 20- and 30-year outlook is not changed by the coronavirus.”



Key background:&nbsp;Stocks&nbsp;<a href="https://www.forbes.com/sites/sergeiklebnikov/2020/02/24/markets-plunge-dow-drops-900-points-as-global-coronavirus-outbreak-worsens/#353cf5f46658">plummeted sharply</a>&nbsp;on Monday, amid news that the coronavirus outbreak has now infected more than 79,000 people globally and killed over 2,600. The number of cases outside of China surged over the weekend, causing concern among global investors as countries like Italy, South Korea and Iran emerge as new coronavirus hot spots. The Dow Jones industrial average fell more than 1,000 points, dropping 3.5% for its worst day since February 2018. The S&amp;P 500 similarly fell 3.5%, its worst drop since October 2018. Monday’s sell-off completely erased both indexes’ gains so far in 2020. The Nasdaq Composite index, on the other hand, declined 4%.&nbsp;



Tangent:&nbsp;Buffett was also asked about U.S. politics during his&nbsp;<a href="https://www.cnbc.com/2020/02/24/buffett-on-bernie-sanders-us-can-do-better-for-those-left-behind-but-cannot-kill-capitalism.html" target="_blank" rel="noreferrer noopener">interview</a>. The billionaire investor said he would “certainly” vote for Mike Bloomberg. “I don’t think another billionaire supporting him would be the best thing to announce,” Buffet&nbsp;<a href="https://www.cnbc.com/2020/02/24/buffett-on-bernie-sanders-us-can-do-better-for-those-left-behind-but-cannot-kill-capitalism.html" target="_blank" rel="noreferrer noopener">said</a>, “but sure, I would have no trouble voting for Mike Bloomberg.” While he said he sympathizes with Democratic front-runner Senator Bernie Sanders’ (I-Vt.) message about income inequality, Buffett doesn’t think socialism is the answer,&nbsp;<a href="https://www.cnbc.com/2020/02/24/buffett-on-bernie-sanders-us-can-do-better-for-those-left-behind-but-cannot-kill-capitalism.html" target="_blank" rel="noreferrer noopener">saying instead</a>, “I don’t believe in giving up the capitalist system.”



Further reading: <a href="https://www.forbes.com/sites/sarahhansen/2020/02/22/buffetts-letter-to-berkshire-shareholders-reveals-5-billion-in-stock-buybacks-and-plans-for-his-berkshire-stake/#140c5c2d39d4">Buffett’s Letter To Berkshire Shareholders Reveals $5 Billion In Stock Buybacks And Plans For His Berkshire Stake</a> 



&#8211;<a href="https://www.forbes.com/sites/sergeiklebnikov/">Sergei Klebnikov</a>, Forbes Staff, <a href="https://www.forbes.com/markets">Markets</a>.

Conference On Issues Affecting U.S. Capital Markets Competitiveness

Here’s What Warren Buffett Says About The Coronavirus And His Outlook On Stocks

Seated in an MBA class in Lausanne, Switzerland, several thousand miles away from his home in Kenya, 31-year-old Jimna Mbaru was told to do something that is considered taboo in many parts of Africa. Before embarking on the course, one professor asked the class to write their eulogies.
“I thought, how do I write my eulogy at 31?” says Mbaru during an interview at his Nairobi office.
“That exercise was meant to make us think long-term. When you die, how will you be remembered? No-one is remembered because he or she left a lot of money. When you think with the end in mind, you find yourself thinking about posterity and creating an institution that will outlive you.”
Decades later, Mbaru—a man whose name features prominently in conversations about Africa’s stock markets—is glad to have sat in that MBA class.
Now aged 66, Mbaru is retired and serves as chairman of his investment bank, Dyer &amp; Blair. He has diverse business interests in several companies, some of which are in the banking and insurance sectors. Mbaru was the driving force at the Nairobi Stock Exchange (NSE) where, as chairman, he was instrumental in transforming the exchange into a global market.
Mbaru describes stock exchanges in Africa as unique. The American approach was always through the equities route, followed later by the bond market.
“For new markets like Rwanda, I took the bond market route first. I advised their central bank to start by issuing bonds and bills with maturity of up to 182 days. Then they extended to one, two and five years so they could start building a yield curve. I knew the equities would come automatically.”
Mbaru was directly involved in establishing stock exchanges in Rwanda, Tanzania, Uganda, Zambia, Malawi, Namibia, Botswana, Mozambique and countries in West Africa.
The success of any stock market is intertwined with the leadership of a country and when he was asked to reorganize the Botswana Stock Exchange, the first thing he did was have a chat with the leaders of the country.
“There is no point of organizing a stock exchange unless a country is committed to it.”
Botswana was an interesting assignment because they had a budget surplus but no budget deficit.
“I recommended that their central bank issue bonds for purposes of managing monetary policy and liquidity in their banking system. They got surrogate bonds and the government decided to fund their pension funds over one year. This resulted in a budget deficit of five years and they were able to move formally into the market.”
Mbaru says the number of listed companies on the NSE has not grown substantially because many of the organizations in Kenya are either family-owned, government-owned or subsidiaries of multinationals which get money from their parent companies.
“They don’t need to raise a lot of capital from the market.”
But this has since changed as family-owned companies like Athi River Mining and Scangroup came to the market to raise money for purposes of expansion.
He says you can make a fortune from the stock market but it is not a place to make money in the short-term.
“We analyzed Kenya’s stock market and found that if you take a five-year horizon and you add dividends, bonuses and capital appreciation, all will average a 35% return per annum.”
Looking at the NSE, foreign investors are the major buyers.
“It is good because they provide liquidity to the stock market.”
With a vibrant secondary market, it means the primary market will be able to get their shares fully subscribed. Besides liquidity, foreign investors make the market vibrant because they do a lot of analysis and research before they invest.
“If Kenyans see foreigners buying they know the shares are good to buy. If anything, they force the local brokerages to upgrade and improve their services and research.”
Regarding the future of stock exchanges in Africa, Mbaru sees a lot of them being internationalized in terms of trading platforms and practice.
“They are also changing in that they will no longer be owned by players. They will be demutualized and will operate like businesses, like the Johannesburg and London stock exchanges.”
He adds that most will be owned substantially by the bigger stock exchanges.
“I see NASDAQ trying to buy Johannesburg or NSE.”

HOW WILL YOU BE  REMEMBERED?

According to the World Bank’s Doing Business Survey, Rwanda is the 45th (out of 183) easiest country in the world to do business in. It takes only two procedures and three days to open a business in Rwanda, compared to an average of eight procedures and 37 days on the rest of the continent.
<div id="attachment_329" style="width: 484px" class="wp-caption alignleft"><img aria-describedby="caption-attachment-329" decoding="async" loading="lazy" class="size-large wp-image-329" src="/wp-content/uploads/2017/04/iStock_000016937094Medium-1024x685.jpg" alt="" width="474" height="317" />Early morning view from a hill into the tropical cloud forest in Nyungwe</div>
Rwanda by far offers the most business friendly environment in the East African Community (EAC). Truly remarkable for a country scarred by a genocide, less than two decades ago, that saw 800,000 people die in 100 days.
Rwanda’s strong performance is thanks to the government’s drive for regulatory reforms. In 2011 alone, the government has: lowered registration fees for businesses; introduced a credit bureau to provide credit rating data and reduced the frequency of value-added tax filings, from monthly, to quarterly. Reforms have also been underway in the banking sector. The International Monetary Fund (IMF) noted government’s restructuring and modernizing in oiling the wheels of the financial sector and concluded that although the financial sector has a few vulnerable banks, overall the sector can withstand a major shock.
Reforms are likely to continue in years to come given the ruling, Rwanda Patriotic Front’s political dominance. President Paul Kagame secured a landslide victory in 2010, which not only ensured his presidency until 2017, but also ensures policy continuity. Political stability, coupled with policy certainty, will go a long way to attract investors.
A central policy focus for the government will be an East African Community initiative in pursuit of a powerful and sustainable economic and political bloc. The European debt crisis could slow the EAC’s pace of establishing monetary and fiscal union. Member states will avoid rushing matters to ensure that they do not wind up in the same mess as the Europeans.
The economy grew 7.5% in 2010. The government expected growth to decline to 7.0% in 2011, but given the performance of the economy as of the second quarter of this year the government revised its forecasts. Government expects growth to average 7.2% per annum between 2011 and 2015. Growth will be supported by investment expenditure to improve the infrastructural base.
The recently signed Bilateral Investment Treaty (BIT) with the United States is likely to boost trade and investment between the two countries. This was the first new BIT with an African country and signals Washington’s seal of approval on Rwanda’s macroeconomic outlook and reform agenda.
Inflation in Rwanda remains benign in comparison to its neighboring countries. Inflation increased to 7.8% year-on-year in October, from 6.6% in September. Rising inflation pressures prompted the central bank into action in October. The National Bank of Rwanda increased benchmark interest rates to 6.5% from 6.0% in a bid to stem these rising inflation pressures. Rising inflation poses a risk to growth and the central bank has to strike a delicate balance. With inflationary pressures being external—food and oil—the impact of monetary tightening is likely to be limited.

Steady As She Rises

There is no point in speculating as to what Russell Loubser, the outgoing Johannesburg Stock Exchange chief executive officer, will be doing next year—because Loubser himself does not know. He could take the route of a hands-on CEO position at a financial institution, as did previous JSE president, Roy Andersen, at Liberty Life. There is also the option of several independent non-executive directorships, for a quieter life after many years of revolutionizing Africa’s biggest exchange. Another possibility is—corporate governance and Companies Act requirements permitting—to perhaps sit on the exchange board itself as a non-executive director or eventually as chairman.
<div id="attachment_262" style="width: 310px" class="wp-caption alignleft"><img aria-describedby="caption-attachment-262" decoding="async" loading="lazy" class="size-medium wp-image-262" src="/wp-content/uploads/2017/04/CTX7294-300x199.jpg" alt="" width="300" height="199" />Russell Loubser and Nicky Newton &#8211; King</div>
“I am not entertaining any thoughts as to what comes after life at the JSE,” says Loubser, who originally comes from Slurry, near Mafikeng.
“Until the end of this year, I remain completely focused on my work at the exchange. To prematurely assess opportunities could give rise to conflicts of interest. People are approaching me and my response is to come back at the end of the year, if still interested. Nothing is going to distract me in these last few months.”
A few things are certain for Loubser, regarding life after the JSE. As a member of the South African Airways board, the link will continue. So, too, will his three-year ministerial appointment as a member of the Takeover Regulation Panel, previously the Securities Regulation Panel. But as for the rest of it, Loubser says there is genuinely nothing definitive. “It’s not as if I have something planned and will reveal it at the last moment.”
An initial five-year contract, starting early 1997, ended up being 15 years of leadership. When Loubser joined the JSE, trading volumes in that first year were 17,854 billion shares, and 2,3 million deals. For 2010, volumes were 71,252 billion shares from 23,8 million deals.
Loubser always credits his team: “It has been an absolute pleasure to work with people who have been so dedicated to improving the exchange and developing themselves. The early days were extremely difficult. The press was relentlessly critical, the exchange at that time was wholly owned by the stockbrokers, it was not offering value, and was viewed as a necessity in order to trade equities. At that time, no one could imagine demutualisation, listing and creating value for the financial community. With this committed team, we proved our critics wrong.”
Loubser’s management style is to surround himself with smart people and give them lots of space. “You then get the best out of them.”
When Loubser took over, the JSE had an extremely poor reputation at home and abroad. Despite being the largest emerging market at that time, and surprisingly highly ranked by size in world terms, it was seen as an inefficient boys’ club plagued by insider trading and front running. Roy Andersen had made a start with transformation, such as implementing new software and trading systems, and the Big Bang deregulation which included allowing corporate membership of the exchange.
“The criticism we received in those initial years was fair and completely justifiable,” says Loubser. “But even when we started demonstrating our progress, the taint persisted. We had a difficult audience to win over and the first few years were very testing.”
With the JSE clearly demonstrating its ability and achievements, and cleverly diversifying its income stream, attitudes started to change and criticisms became compliments. However, brokers would still like to see lower trading prices. “We are fully conscious of this,” says Loubser, “and are benchmarked against other exchanges by independent parties to see how competitive our pricing is. Trading revenues are a simple function of volumes and pricing, and if volumes grow, there is certainly scope to reduce pricing.”
Despite having accomplished so much at the JSE, there is one huge task that Loubser regrets he will not be able to see through to the end—the complete overhaul of the bond market, which the JSE acquired in 2009. This particular market comes in for much criticism regarding its antiquated telephonic trading, selective pricing, and operating on a foundation of personal connections and relationships. The wish list for this market is a digital, visible, transparent central order book that promotes price discovery and improves liquidity, especially for languishing corporate and municipal bonds.
“My trading career started in the fixed income market, so I would have liked to have been on the ground and involved when the JSE cleans up the bond market, as it did with the equity market,” says Loubser, who represented the banking sector during the formation of the Bond Market Association, now the Bond Exchange of South Africa. He has no doubt that incoming CEO Nicky Newton-King will be able to achieve this. “It will be quite a challenge for her, but she has a fantastic executive committee on which she can rely, and she will need their talents. Severe changes as to how the bond market works are imperative and will be good for South African financial markets.”
One disappointment—despite much effort—is that other exchanges in Africa have not taken up offers to use the JSE’s technology and platforms in order to make their own markets more efficient. When Loubser took over at the JSE, he looked to exchanges in countries such as Australia and Singapore. “We were shocked by our glaringly obvious poor services and huge inefficiencies, and this kicked us into action. Exchanges in the rest of Africa should go through this same self-examination and take a good look at themselves and the potential they have to play in transforming their markets and economies. As yet, they are not seeing the urgency and benefits of an innovative exchange. A good exchange is a strategic national asset.”
Unlike many CEOs in South Africa, Loubser is not afraid to make political comment when appropriate. He has addressed issues such as government spokesperson Jimmy Manyi’s accusations that blacks do not own enough of the companies listed on the JSE board, and he supported Trevor Manuel, South Africa’s Minister in the Presidency in charge of the National Planning Commission, for taking Manyi to task on racism. “At present, South Africa does ‘work’. But this does not mean our leaders can simply stop at this point. It can be so much better and we should not settle for mediocrity,” says Loubser. His frankness also extends to the tragedy of Zimbabwe under the Mugabe regime.
As the JSE grows increasingly more attractive as a takeover target, Loubser says this type of decision would be for the shareholders. “But my recommendation at this point in time would be to wait a few more years. The exchange is presently working on many things that would add value. At a later stage, a tie-up with an appropriate party would be beneficial to shareholders, and would help take the exchange to the next level.”
Loubser says that despite persuasive efforts from his staff to throw him a huge goodbye party, that would not be his style and he prefers a quiet exit. “I would rather get all my staff together in the auditorium a few days before I leave to say my farewells and thanks.” Leaving the JSE after an incredible 15 years will no doubt be heart-rending for Loubser.
“I will miss the JSE a lot. Let’s just say it will be a very difficult and emotional time for me.”
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New JSE CEO—more than well prepared for the role
Nicky Newton-King has been the JSE’s deputy CEO since 2002, joining the exchange in 1996. Her professional qualifications and experience are legal, whereas Loubser is a chartered accountant with a merchant banking and trading background. Prior to this, Newton-King was a partner at legal firm Webber Wentzel, specialising in the securities and financial services industry, with the JSE as a client.
As the JSE is regarded as one of the best regulated exchanges in the world, Newton-King feels strongly about the development of financial markets across the rest of the continent.
“It is time for African exchanges to stand up and make some brave choices if they want to harness emerging market appetite and attract significant international investment. They run the risk of missing out on the emerging market story if they do not focus on building large and sustainable exchanges.”
African stock markets are now at a point of critical inflection, as was the JSE in the early 1990s. “The JSE has been through its much-needed development, and has the battle scars to show for it,” says Newton-King. “It is now by far the largest exchange in Africa and internationally respected. African exchanges need to similarly decide on their strategies for the future. Are they going to stand alone and individually compete for business, or will they work together to leapfrog stock exchange development in Africa?”
Newton-King says that African stock markets must realize that no one owes them a living. “They are not there to serve themselves. If they do not provide offerings of an appropriate and international quality to investors and issuers, they will be bypassed.”
One route would be to regionally harmonize the rules in African capital markets, as seen in the European Union. However, Newton-King highlights the problem of which markets would be willing to concede to the rules of others. Another possibility for African exchanges is to promote cross-listings, in which a company is listed in more than one country, as dual-listings generally increase trade in the home country. Newton-King says that ideally, the dual-listed companies should come to the JSE for their secondary listing—rather than go offshore to London or other such markets. “African companies should preferably stay on the continent.”
Yet another possibility is to create African technology hubs that allow execution in multiple venues through a single channel of access. Newton-King notes that exchanges must then be willing to collaborate and resolve issues such as hub ownership and operational responsibility. A fourth route would be to establish Pan African stock exchanges, by collapsing existing individual exchanges into regional ones. However, Newton-King again highlights the potential problems of ownership and location, and believes this way is more suited to environments which are starting from nothing and have no legacy exchanges to deal with.
Newton-King recommends a combination of cross-listings and technology hubs to promote African stock exchange development. “This would lead to meaningful and accelerated change which would best serve the interests of issuers and investors. African stock exchanges should not go it alone. They should have the courage to work together to create robust capital markets across the continent.”
Looking to the JSE, Newton-King says one important strategy for the exchange in the near term is to decide on a trading model for the bond market. “We have now owned this market for two years and are focused on determining a model which promotes transparency and hence liquidity.”
She anticipates an exciting future for the JSE. “This environment is constantly changing. New regulations, technological developments and innovative products keep us motivated in our aim of linking South Africa to global markets and maintaining our position as a world-class exchange.”
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