At the close of business, Wall Street’s major indexes posted a deep drop on Monday, with Standard & Poor’s 500 who confirmed the bear market statistics Or a “bear market”, given the growing fear that sharp increases in interest rates could lead the US economy into a recession. Industry average The Dow Jones index fell 2.58 points. S&P 500 Index, 3.9% and Nasdaq Composite lost 4.7 percent.
Several data emerged in this “black” panorama that brought pessimism back into New York markets. On the other hand, the S&P has re-entered the area alcohol marketAnd the The situation that occurs when accumulated profit taking reverses losses of more than 20% from previous highs. with a cumulative decrease of 22%, Casualties are expected to continue Short term.
Monetary restrictions to curb the inflationary process in the United States will slow down economic activity
It must be emphasized that Wall Street is piling up, In the last ten weeks of operations, nine were negative. This is the most important falling line since 2011. In this sense, the first half of 2022 is one of the worst historical price performance: Nasdaq accumulates 31% decline, S&P 500 yields 21%, Dow Jones, 16%.
Another issue that cannot be ignored is the question of the inversion of US Treasury yield curves, that is, US public skepticism. This represents that US short-term debt is more profitable than long-term debt term. Economic theory says so in the situation “Normal” long-term lending should be more profitable than short-term lending. The higher the time horizon, the greater the uncertainty about what might happen. Experts confirm that Curve inversion never fails to predict the arrival of recession.
In this regard, the rate treasury In 10 years it jumped to 3.366%. annual, Highest level since April 27, 2011, in more than a decadein a clear indication of investors’ aversion to risk, which more affects emerging market stocks and bonds.
The Wall Street price crash was already in the news in other periods of 2022, particularly after Russia’s invasion of Ukrainepushing the prices of raw materials, such as energy and food, to record levels, and Overheated inflation on a global scale.
The first half of 2022 is one of the worst performances in history for stock prices: The Nasdaq is down 31%, the S&P 500 is down 21%, and the Dow Jones is down 16%.
Finally, an alert is triggered Syrian Poundin real terms – that is, discounting inflation for the past two years – is Levels before the global spread of COVID-19Therefore, all the massive cash assistance has been consumed as of February 2020, which is precisely the origin of the highest inflationary escalation in the US in 40 years.
The High inflation in the United States and the Russian invasion of Ukraine The times of monetary tightening invigorated by the US Federal Reserve have accelerated, as the conflict has given impetus Additional cost for raw materials And the consequent inflation pressure.
The Inflation in the United States re-emerged in May, as it appeared The CPI jumped 8.6% from 2021, the largest increase since December 1981According to government data released on Friday.
Wall Street indices enter the “bear market” and the inversion of bond curves predicts a possible recession
The North America CPI rose 1% compared to Aprilafter a modest 0.3% increase in the previous month, the Labor Department reported, well above the expectations of analysts, who had expected inflationary pressures to ease slightly.
“It is absurd and inconsistent, I suppose, that Wall Street is asking the US Federal Reserve to “break” everything. Inflation has partial monetary roots in the literal sense of the word, but there is another massive root shock From goods What we have the problem is that If the Fed decides to get rid of inflation by attacking demand, it will have to break everything. Therefore, the market is imploding and I think that is somewhat of a problem.” German VermoHead of Strategy at IEB Group (Investing in the Stock Market).
“In a way, everything that has been done in terms of monetary restrictions will cause the US economy to contract in a couple of months. Everything is working with Lateness (Delay), therefore, to live this as an existential drama and that this is the end of the universe seems to me an exaggeration,” Fermo asserted. “So, give The feeling that the market expects the Fed to be more powerful To counter inflation the North American central bank can’t fight. This inflation will only be resolved when the supply shock is resolved,” summed up the IEB analyst.
Inflation in the United States does not have a monetary origin only: the rise in the prices of raw materials affects the scarcity of food and fuel
for George VideosClave Bursátil, Technical Analyst, “US inflation data punished the market, annual inflation rose to 8.6% and monthly inflation rose 1%. The This negative data was higher than expected and expected; The reaction was obviously very negative. The stock market environment is very tense, uncertainty is very high and there Fear that already high inflation will also change into ‘stagflation’. There is still no data confirming this position, but there are a lot of analyst forecasts, according to estimates that are always and in any case a possibility. Could it happen? Of course they are stupid, but until they know each other, maybe not.
Analyzers Personal Portfolio Investments He noted that “at the international level, we continue Pay attention to the Fed’s decisions, which last week found a high inflation figure and above its expectations, which could lead to increases in rates higher than those initially expected. like little, A gallon of fuel in the United States exceeded $5 for the first time in its historySo Upward pressures are likely to continue And it leads to increasingly stringent measures. Logically, we do not lose sight of the Russian-Ukrainian conflict or the behavior of China, which are key variables in global inflation.”