📊Since mid-June, market participants have witnessed the recovery of the stock market, that has dipped significantly after the aggravated geopolitical situation and rising interest rates. The S&P500 index reached $4300 and is now testing serious resistance (resistance line). After a very impressive recovery, the rally in the market may stall due to increased concerns about the state of the global economy.
On the chart (left), you can clearly see how the market reacted to the last three rate increases (+0.5%; +0.75%; +0.75%). The latest increase of 0.5% on April 4 turned out to be unfavorable for the market (-18.17%). Further two increases of +0.75% had a positive effect and the market rose by +6.79% and +7.80%, coming close to offsetting the previous decline. Raising the rate to 3.0% is currently estimated at 75% probability. Until that time (09/21/2022), growth is expected to continue. Going forward (in the second half of September), the market may face profit taking from long position holders, which could cause a fall, if not a sharp fall. However, there is also the possibility that there will be intense short selling pressure. It is especially necessary to pay attention to the price area near the $4590 level.
It's not just America that's worried about a recession right now. Germany and other eurozone countries are hit hard by the energy crisis. China's economic growth concerns also came out this week, following the release of disappointing statistics on retail sales, industrial production and fixed investment on Monday.
If concerns about the continuation of the "bear" market are justified, then we can expect a fall of -20% (based on historical data).
To top it all off, the Fed has just begun to cut its balance sheet. We know that interest rates will rise in the short term, and not just in the US. Inflation in advanced economies is on the rise. The global economy is suffering, and the central banks of almost every major economy are tightening their policies. In such conditions, the growth of shares is not to be expected.
On the chart (left), you can clearly see how the market reacted to the last three rate increases (+0.5%; +0.75%; +0.75%). The latest increase of 0.5% on April 4 turned out to be unfavorable for the market (-18.17%). Further two increases of +0.75% had a positive effect and the market rose by +6.79% and +7.80%, coming close to offsetting the previous decline. Raising the rate to 3.0% is currently estimated at 75% probability. Until that time (09/21/2022), growth is expected to continue. Going forward (in the second half of September), the market may face profit taking from long position holders, which could cause a fall, if not a sharp fall. However, there is also the possibility that there will be intense short selling pressure. It is especially necessary to pay attention to the price area near the $4590 level.
It's not just America that's worried about a recession right now. Germany and other eurozone countries are hit hard by the energy crisis. China's economic growth concerns also came out this week, following the release of disappointing statistics on retail sales, industrial production and fixed investment on Monday.
If concerns about the continuation of the "bear" market are justified, then we can expect a fall of -20% (based on historical data).
To top it all off, the Fed has just begun to cut its balance sheet. We know that interest rates will rise in the short term, and not just in the US. Inflation in advanced economies is on the rise. The global economy is suffering, and the central banks of almost every major economy are tightening their policies. In such conditions, the growth of shares is not to be expected.
