Wall Street is practically in the Bear Market this 2022, that is, in the bear market. Technically, all that remains is for the Dow Jones to reach the accumulated 20 percent drop, although it is very close. Regarding the other indicators, there is no doubt about its trajectory in the year.
At the end of last week, after another period of turbulence, the main indicators of the New York stock market accumulated another disaster and extended their declines in the year. Thus, the S&P500 index, which had apparently left the Bear Market, returned to it after an accumulated drop so far this year of 22.5 percent. The Dow Jones defends itself, although it is already very close to the bear market and really in the year there are few periods of profits that it has registered, just like the other indicators; At the end of the turbulent week last, the accumulated balance of this mythical indicator is minus 18.56 percent.
Without a doubt, where the alarms have been on for a long time and everything indicates that they will continue to do so for the rest of the year, it is in the technology market, the Nasdaq index, which already accumulates a cumulative collapse of 30.53 percent in this 2022if it stays like this we would be facing the biggest crisis in this market since the dot-com crash at the beginning of the century.
complex global landscape
While it’s not just this week, events in this past period have pushed markets further down as investors gradually have little doubt about where the economy is headed.
For example, during the week several central banks of industrialized nations joined the US Federal Reserve and raised their interest rates. It is a fact that fears that the global battle to control inflation will lead to an economic recession have increased among investors.
As if that were not enough, concerns in the markets increased with the stimulus plan announced by the United Kingdom; the government of Liz Truss tries to avoid a recession that seems imminent, and in the meantime, the pound sterling plunged to the lowest level in 37 years against the dollar.
Fears have increased because the plan includes the most radical tax cut in 50 years, since 1972, and markets fear that the package could trigger a currency crisis, given concerns about rising debt and inflation.
In this context, WTI prices plunged below $80 a barrel for the first time since January this year. The market is headed for its first quarterly loss in more than two years; As if that were not enough, the strength of the dollar is also hitting the prices of raw materials quoted in that currency, they rise more every day and that means only one thing: more inflation.
It does like a recession, it walks like a recession… it’s a recession
At this point and after the series of falls that the New York stock market has registered in recent months, plus the full downward trend that it has so far this year, the sentiment of the analysis houses is almost unanimous that the question is no longer whether or not there will be a recession in the United States and in the world, but when and how large will this be?
In fact, some believe that at least part of Europe is already in recession and that the other part will not be long. The Fed’s warnings made this week did not fall on deaf ears, if any doubt remained it no longer existsthe Fed and the other central banks of the industrialized nations will go where necessary to stop and lower inflation; Even if they don’t say it, that includes a recession.
They don’t even deal with Latin America, this part of the world will “dance” to the tune played by the great powers, as always happens. The recession will be global because it will encompass at least the entire West and part of the emerging worldespecially from this continent. But nations like China, the Asian giant, will also suffer, recently lowering the GDP expectation for this year from 5 to 4 percent, with projections of further cuts.
Banxico will raise the reference rate to 9.25%, closing the year in double digits
Faced with strong external pressures, the Bank of Mexico (Banxico) will have no choice this week but to raise the reference interest rate again, the increase is “sung” and will be 75 basis pointsa lower number would inject more uncertainty and volatility into a market that is extremely nervous about the prevailing conditions in the world.
If this increase in Banxico’s rate is confirmed, a similar one would be enough at the next meeting to take this indicator to double digits and thus continue to mark history in a negative sense, since the current levels are the highest since Banxico used the reference rate as a monetary policy tool.
Regarding the probability that Mexico falls into a recession next year, it seems that the same thing happens as in the rest of the world, everyone considers it a fact or highly feasible, except for those who deal with the central bank, and much less in the instances governments, where the overflowing optimism does not allow the slightest trace of doubt that the Mexican economy will grow this administration at 5 percent.
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