The Russian stock market: 17 weeks of decline and no bottom in sight — analysis of the current situation
The Russian stock market is experiencing a prolonged correction that has been ongoing for 17 consecutive weeks. During this period, the index has corrected by nearly 25%, which is hard to call a "slow decline"—it is a full-fledged bearish trend. The current situation is characterized not so much by negative news as by a lack of buyers: the market is falling simply because no one wants to buy.
The bottom has not yet been reached
Analysis shows that a market bottom in the next three months is unlikely. A rate cut by the Central Bank is expected in the second half of the year, but its size is unlikely to have a super-positive impact. Dividends, which could serve as a growth driver, will likely only act as a brake on the decline—after they are credited, purchases may occur, but their volume will be insufficient to reverse the trend.
New IPOs expected before the New Year also do not inspire optimism. Essentially, this is a "lifeline" for companies seeking financing not for growth but for survival. Experience from recent years shows that most such offerings have not generated returns for investors, with shares trading below the offering price.
Key drivers of the second half of the year
The main factor remains the economic situation and the key interest rate. If there is no news on the geopolitical front, the rate will dominate investor sentiment in both the bond and stock markets.
Dividend-paying companies will attract the most attention, especially those paying dividends comparable to or above the rate. However, with a negative economic trend, they will perform better than the market, but confident growth should not be expected from them.
New IPOs, as practice shows, have practically not yielded returns for investors, with most securities trading below the offering price. High uncertainty around the rate will reduce the number of companies willing to go public.
Strategy for the retail investor
For a conservative investor with a 2–3 year horizon, the portfolio foundation is bonds, primarily short- and medium-term OFZs. Stocks are only acceptable in a small proportion with regular purchases, as it is unknown when the bottom will be—this year, next year, or in 3–5 years.
Gold—definitely not, it is a non-investment asset. Cash is acceptable as a waiting position, placed in deposits or repo transactions.
Cryptocurrencies are described by experts as an extremely toxic asset over a 10-year horizon. The development of AI and the construction of the largest data center in the US could make crypto wallets vulnerable. The situation will only change if they learn to tie the asset to a person, but then the very essence of crypto is lost.
My conclusion: The current situation in the Russian market is not a correction but a structural bearish trend caused by a lack of internal growth drivers and high uncertainty. Investors should prepare for a prolonged period of low returns and reconsider their expectations in favor of conservative instruments.