Week in a Glance: Afghanistan, FOMC Protocols, Economic Slowdown
The past week turned out to be very eventful for all sorts of events, as well as price movements in the financial markets. What is typical (or rather not typical), logic was seen from time to time in price movements and they generally corresponded to the fundamental background that was forming during the week.
The week began with a double negative. On the one hand, Afghanistan and the Taliban, on the other, weak data from China (industrial production and retail sales came out much worse than the previous values and turned out to be below market expectations). All of this combined made investors tense, but optimism was still the dominant emotion. The data on retail sales in the USA, as well as the minutes of the last meeting of the FOMC, were supposed to act as a calming factor.
But it was here that the scythe found itself on the stone, which resulted in massive sales in the commodity markets and downward pressure on the stock markets.
US shoppers cut their purchases in July even more than expected (-1.1% versus forecasts of -0.3%), as concerns over the delta Covid-19 option reduced shopper activity and government incentives have dried up. Well, the FOMC minutes showed that the Fed is finally moving from the stage of denying reality to the stage of bargaining and its gradual acceptance. Representatives of the Federal Reserve System at the July meeting discussed plans to reduce the rate of monthly bond purchases by the end of the year. That is, the start of tightening US monetary policy is just around the corner.
In total, the fundamental background is more than favorable for the start of the correction in the US stock market. It has matured and purely statistically. Over the past 20 years, there has not been a single case when the index grew plus or minus by 100% without a subsequent deep correction. And the SP500 has just surpassed 100% growth since the pandemic lows. In addition, according to research by Bank of America, only 27% of fund managers expect further growth in the US stock market over the next 12 months.
The week began with a double negative. On the one hand, Afghanistan and the Taliban, on the other, weak data from China (industrial production and retail sales came out much worse than the previous values and turned out to be below market expectations). All of this combined made investors tense, but optimism was still the dominant emotion. The data on retail sales in the USA, as well as the minutes of the last meeting of the FOMC, were supposed to act as a calming factor.
But it was here that the scythe found itself on the stone, which resulted in massive sales in the commodity markets and downward pressure on the stock markets.
US shoppers cut their purchases in July even more than expected (-1.1% versus forecasts of -0.3%), as concerns over the delta Covid-19 option reduced shopper activity and government incentives have dried up. Well, the FOMC minutes showed that the Fed is finally moving from the stage of denying reality to the stage of bargaining and its gradual acceptance. Representatives of the Federal Reserve System at the July meeting discussed plans to reduce the rate of monthly bond purchases by the end of the year. That is, the start of tightening US monetary policy is just around the corner.
In total, the fundamental background is more than favorable for the start of the correction in the US stock market. It has matured and purely statistically. Over the past 20 years, there has not been a single case when the index grew plus or minus by 100% without a subsequent deep correction. And the SP500 has just surpassed 100% growth since the pandemic lows. In addition, according to research by Bank of America, only 27% of fund managers expect further growth in the US stock market over the next 12 months.
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