What Lies Ahead in US Markets?

All the three leading US stock market indices ended in the red at the close of trading on 31 May 2022.

It has been one of the worst starts for the year with the Dow Jones down by 9.2%, S&P 500 down by nearly 13.3% and Nasdaq 100 down by almost 23% year-to-date.

Starting June 1, the Federal Reserve balance sheet is going to be reduced as the Fed begins quantitative tightening to start shrinking its $8.9 trillion balance sheet from Wednesday, something which will impact the short-to-medium term pathway for stocks ahead.

As inflationary pressures, rate hikes and recessionary fears continue to prevail ahead of US payroll numbers this Friday, the responsibility for controlling the decades-high inflation ahead of the November midterm elections rests with the US Fed.

Given the unclear growth or slowdown pace of the US economy, volatility may be high in the stock market. Will the market slide subside, or will there be a bear market rally going ahead, remains to be seen.