This is a very fragile and unstable market, which may fluctuate greatly at any time.
-If US stocks continue to plummet, according to Trump, Biden should be sent to Mars.
Street blood.
Last week, U.S. stocks performed worse in the last hour of every trading day, which is often a bad signal for the next day. This negative sentiment continued on Monday: Dow Jones index once fell by 3%, S&P 500 index once plunged by 4%, Nasdaq index once fell by 5%, and everyone pressed the "sell" button after the start of New York session. Before that, the major European stock indexes plunged by nearly 4%.
US stock market opening massacre. US stocks fall hard and fast, like a professional killer who does not give any chance to hesitant targets; Like a thunderstorm in summer, lightning, strong wind and thunderstorm quickly clear up after rain. It's just that this time you are standing in the house watching the rain, or getting caught in the rain outside the house, and your mood is definitely different.
What happened?
No one knows that there is a distinct feature in the market recently-sell first and then ask, sell first and then find out what happened.
1) Before the opening of this week, a report released by Goldman Sachs was screened on Wall Street (every time the market is in great turmoil, a relevant report of Goldman Sachs can be found).
Goldman Sachs said that at every meeting since March, the Fed risks tightening its policy. The implication is that the Fed has eight meetings in the whole year, except for the meeting in January, which will not raise interest rates, and the remaining seven meetings have the risk of raising interest rates each time, which means that the actual actions of the Fed may be more radical than the current market expectations, which is refreshing.
Goldman Sachs economists led by Jan Hatzius said in the report that the Federal Reserve is expected to raise interest rates once in March, June, September and December, and it is expected that the Federal Reserve will announce the start of scale reduction in July. But inflationary pressures mean that the risk is somewhat skewed upwards of our baseline scenario, and it is possible that officials will act at every meeting until the inflationary situation changes. This raises the possibility of one more rate hike or an early announcement of a scale reduction in May, as well as the possibility of raising interest rates more than four times this year.
2) In time, this week is the Fed's interest rate resolution week, and the Fed will announce its latest resolution at 3:00 am Beijing time on Thursday. Before that, there will be various "nervous restlessness" in the market. The market is eager to reflect the expectation of faster and more radical action by the Fed (but this expectation exceeds the reasonable level).At present, it seems that the market will not have a clear trend until at least after Thursday.
3) The weaker-than-expected US economic data triggered a further decline in the stock market. The initial value of Markit manufacturing PMI in the United States dropped from 57.7 in December to 55 in January, which was lower than the expected 56.7 and the lowest since October 2020.
Michael Wilson, a strategist at Morgan Stanley, said that the plunge in January fitted his so-called ice and fire depiction, that is, the market is bound to fall under the condition of tightening monetary policy and slowing growth. He once again used Game of Thrones to warn that "winter has arrived".
What happened again?
However, from the closing situation, it is another incredible scene-the three major stock indexes in the US stock market closed up in an all-round way, and the decline of thousands of points in Dow Jones recovered overnight, which can be called the Great Miracle Day of US stocks. Panic selling at the opening, dumbfounded. Sometimes, the only thing you need is your human calm.
What happened behind the spectacular rally?
The Dow Jones index rebounded by thousands of points
The mainstream reading of Wall Street analysts is that the stock market sell-off has been exaggerated.
In fact, the most important clue comes from the federal funds market. Traders seem to think that due to the collapse of risky assets,The Fed will not be able to raise interest rates four times in 2022, and markets have suggested the number of federal funds hikes by December 2022 is now significantly lower than four, the first since Jan. 14.
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In addition, there is another signal that analysts have keenly captured-the Cboe Volatility Index (VIX) soared by 35% on Monday, hitting the highest level since October 2020. A sharp rise in VIX usually indicates that the market will bottom out in the short term. The recent parabolic rise in the index may indicate that selling is exhausted and the stock market rebound is close at hand.
In the past, when US stocks were bottoming out, VIX rushed to at least 38 or 40 points
Marko Kolanovic, chief equity strategist at JPMorgan Chase, said that the recent correction of risky assets seems excessive, and the combination of technical indicators close to oversold areas and bearish sentiment indicates that we may be in the final stage of this correction. While the market is struggling to digest the rotation caused by higher interest rates, we expect the earnings season to be reassuring that in the worst case scenario, we may see the return of Fed put options.
However, the singing voice of US stocks is still endless:
Ed Clissold, chief US strategist at Ned Davis Research, said that more downside space may be opened in the coming months when the market adapts to the reality that the Fed withdraws its easing policy, the profit slows down and the federal stimulus measures are greatly reduced. The stock market will fall by 20% from the peak hit in early January.
Peter Chatwell, head of cross-asset strategy at Mizuho, said that in the first half of this year, the S&P 500 index may drop as low as 3,800 points, which is about 12% lower than the current level. The Nasdaq 100 is likely to drop about 15%, hitting bottom near 12,000.
Mike Wilson, a strategist at Morgan Stanley, said the bubble stemmed from overvalued stocks.
Sam Stovall, chief investment strategist at CFRA, said that the current market downturn is a typical plunge. Seasonal factors may also have an impact, and the stock market tends to perform poorly in the second year of the president's term.
Maybe you don't know, since last night, all the logic of financial markets has been disrupted:
First, the market began to seriously consider the economic recession, which has never happened in the past year. Otherwise, why did the Russell 2000 index fall as before? The market believes that the aggressive policies of the Federal Reserve will push the US economy to slow down sharply or even fall into recession next year.
Second, the market consensus on the Fed's interest rate hike in 2022 has been disrupted, and "raising interest rates four times" is a watershed. In the past, the interest rate market expected the Fed to raise interest rates by 25 basis points in March and at least four times in 2022. Since last night, the market has expected the Fed to raise interest rates less than four times this year. However, our concern is not whether the Fed raises interest rates several times, but whether the market has consensus expectations. If there is consensus, the market will be stable, and if there is no consensus, the market will be in turmoil at any time.
Third, the Fed no longer covers the market. To be more precise, not "no more", but no more. A key difference now from the past is that the Fed, which is focused on dealing with rising inflation, may not be able to make commitments even if it wants to help the market, at least for now.
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