Will central banks save the world?
Too much or too little action on key bids will plunge us into uncertainty. However, this lack of visibility makes markets nervous.
The big question right now is whether Fed boss Jerome Powell is a superhero or a super-zero. His job is the most dangerous job in the world, and even a tiger stuntman or trainer is less at risk than what he will have to do in the next eighteen months.
“Bear Market”
In any case, so give the world stock exchanges. Trends are bearish, and most indices are included bear market – in other words, in bear territory. We haven’t had such situations on a regular basis in a long time, and it’s true that every time we find ourselves in it, we seem to lose money.
However, in the last one hundred and forty years we have already experienced 29 similar situations with an average duration of about three hundred days. Therefore, we cannot say that this is a position that is unknown to us. An unpleasant position, of course, but known.
11% inflection point
Therefore, the wonderful world of finance is wondering how low we are going to go down and, above all, how long. So we can try to ask ourselves the right questions, but it will still be difficult to answer them.
An interesting inflection point is 11% higher, where we are on the S & P500 – the index expands US stocks. This 11% corresponds to the level of 3600, which reflects the moving average for two hundred weeks. Eleven percent, which would also represent the theoretical level of the market that affects the fact that we are in recession. Don’t ask me how we came to this very accurate figure, I’m not an economist.
Recession
The problem for investors now is that we have no vision for the future of the markets. And we know we don’t like to touch at all. However, we are fully aware that the Fed will have to be a little tougher in the next two meetings to show the inflation for which it is heating up, but after July it will be a big mystery.
Inflation rates must begin to fall before we can try to interpolate with a rate hike led by Jerome Powell. In the last publication in early May, we saw that there was finally a slight improvement, as the performance was weaker than the previous month – this can be considered a small glimmer of hope on a moonless night.
Gluten and cans
But at the moment we are in the scenario of a disaster movie, where one problem overrides another. Now the problem is our gluten intolerance. Indeed, agricultural products (including wheat) are being hauled by the elevator, and that does not bode well for the future – India’s embargo on wheat is burning powders, and the explosion in demand for plane tickets as the holidays approach, as well as China’s deconfinement are pushing oil up. that will not help our banks (with gasoline).
Therefore, these next few weeks will be crucial; either we can reverse the inflation trend and people may start saying that the Fed is landing softly, or the situation will get worse before it gets better. But in The good news is that we still know that during periods of rising rates, stock markets also end up growing, you just need to be a little patient. That’s good, good weather is back, let’s wait for the sun.
Thomas Veylet, CIO Merion Swiss Partners
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