Having an accurate answer is of course impossible because, as we know, there are countless factors, many of them unexpected, that can affect or benefit the performance of the markets.
However, we have elements that allow us to draw a panorama that serves, at least, to have some guidance on an eventual route that the markets will follow.
After a fall, comes a rebound
Another of the unwritten laws of the stock markets in general states that, after a large adjustment (fall), there is a rebound.
This is explained because, as we know, markets are also governed by cycles, so the natural step for a decline is a rise, or vice versa. It is not necessary to go too far to know what we are talking about; let’s look at the case of growth, as we know in 2021 global GDP rebounded after the big slump that occurred in 2020 due to the lockdowns due to the pandemic.
As for the stock markets, let’s remember what happened in 2008 with the crash and the subsequent rally of 2009. In fact, it was in this period that the largest long-term upward trend in history on the New York Stock Exchange was recorded to date.which lasted for almost a decade.
Based on all of the above, it is foreseeable that Wall Street will rebound, at least if economic conditions allow it. But, we live in times in which things happen that often challenge everything established.
complicated start
The start of this year in the stock markets in general could be somewhat difficult, maybe not with the strong crashes of 2022but enduring the negative trend and a dose of pessimism that we recorded in that year.
The cause of such expectations has to do with the possibility that, next February, the central bank of the United States, the Fed, decrees a new increase in its interest rate, the expectation indicates that said increase could be 25 base pointsto bring this indicator to 4.75 percent.
The justification for such a measure would be that he has not finished his task; that is to say, that of controlling and making inflation go back towards the objective of 2 percent per year. If we remember, inflation in the United States is already below 8 percent, but still well above the Fed’s target of 2 percent. In this way, a negative start in the markets should not surprise anyone, as long as it is not so violent. Otherwise, it would be a reflection that we have bad news in terms of growth and inflation.
Pause on the Fed, pause on the economy and markets
Those who follow the Fed say that this central bank could take a break at the beginning of the second half of the year and stop raising interest rates, with the aim of evaluating what the effects of rates have been on the trend and expectations of inflation.
If true, there is expected to be a pause in growth as well, and certainly in stock markets, trending somewhat erratic or moderately higher as investors will take advantage of some of the sharp adjustments that took place in the stock market during 2022, especially in the technology sector.
Fourth quarter, will be decisive
It will not be until the fourth quarter of this year, that is, from September, when the markets define a trend with greater precision, if they have not done so by then.
At that time, we will supposedly know more precisely if the Fed and the rest of the world’s central banks were successful in controlling inflation. and reduce the expectation in said indicator with the adjustment of the monetary policy. By then we will know what the trajectory of growth will be and how the stock markets will reflect it.
As we can see, we are not facing an easy year, but quite the contrary; Let’s not forget that we live in times in which the traditional and common have lost ground in the face of the unexpected.
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