Thomas Peterffy has some advice for bullish investors and traders amid overwhelming volatility and an ugly general downward tilt for equities: focus on the long term.
The founder and president of the Interactive Brokers group IBKR,
says he sees a lot of “tough problems” facing the market on the “immediate horizon”, and warns that anyone expecting stability in financial assets in the immediate term, as the world is in the throes of to runaway inflation and bloody clashes in Eastern Europe, could be seriously disappointed.
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“Inflation is raging all over the world, interest rates have to go up…and that will be a shock and the fallout will be negative,” Peterffy explained in an interview Monday afternoon. “All of this is not good for the markets,” he said, adding metaphorically:
“ “We all dance on the Titanic.””
He observed that the heightened geopolitical tension between Russia and the United States following Moscow’s invasion of Ukraine represents a monolithic source of uncertainty for the markets, even if inflation declines.
Peterffy, who is longer-term bullish on equities, said Russia’s siege on Ukraine marked “serious concern” and a headwind for appreciation in risk assets.
The conflict, which began on February 24, marks the largest military confrontation on European soil since the Second World War and fears that Russian leader Vladimir Putin may resort to nuclear weapons are a real source of consternation.
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On Monday, Russian Foreign Minister Sergey Lavrov in an interview broadcast on Russian state television, warned that the risk of World War III was real and said the risk of nuclear weapons deployment should not be underestimated.
“This is our key position on which we base everything. The risks now are considerable,” Lavrov said.
“I wouldn’t want to artificially increase those risks,” Lavrov continued. “Many would like that. The danger is serious, real. And we must not underestimate it.
His comments followed remarks made a few days ago dismissing suggestions that Russia might eventually turn to nuclear weapons in its military campaign in Ukraine.
Hungarian-born Peterffy said he was watching the geopolitical landscape closely as Russia’s war against Ukraine unfolded, with particular emphasis on how it could reshape the world order.
“Where will China be?” asked the founder of Interactive Brokers. “Will the West push Russia firmly into the arms of China? If so, he said, it’s “not constructive for the markets.”
For its part, trading platform Interactive Brokers saw its trading volume plummet, along with profits and revenue, in the last quarter as securities lending activity waned.
Shares of Interactive are down 21% so far in 2022, compared to a 7.4% drop year-to-date for the Dow Jones Industrial Average DJIA,
a drop of 11% for the S&P 500 SPX,
and a 19% drop for the Nasdaq Composite Index COMP,
during the period.
Peterffy said markets will eventually rise when investors realize that, despite rising inflation, equities are the only game in town. But he does not know when this change begins. “In the long term, because of inflation, the stock market will start to rise again, at least in nominal terms,” he said.
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