The so-called “discount factor”, always in force in the stock markets, is clearly present at the moment on Wall Street.
At the close of operations this Monday, the US stock markets completed four days with losses.
The position of the Federal Reserve (Fed), of continuing to increase rates as much as necessary until inflation is seen to recede significantly, weighed on investors.
Thus, the Nasdaq Composite (CCMPDL) led the falls on Monday with a negative adjustment of 1.49 percent, followed by the S&P 500 that fell 0.90 percent and closed at its lowest level in more than a month, while the Dow Jones Industrial fell 0.49 percent.
For some analysts it is a fact that the gains at the end of the year, known as the “Christmas rally” or “Santa Claus rally”, for the moment do not seem to consolidate and it is not known if it will happen.
Therefore, fears of a deeper recession for the following year, caused by a rate hike by the Fed, is modifying the trajectory of the markets due to investor sentiment.
In this context, the former president of the New York Fed and Bloomberg Opinion columnist, William Dudley, he explained that bullish markets could only cause the central bank to tighten further.
Without elaborating further, what Dudley meant was that markets have waited weeks for the Fed to send signals that it will be less dovish next year but the opposite is likely to happen, something that has investors concerned in the final stretch of the year.
The inflationary floor is near
For other experts in the markets, it is possible that peak inflation would already be ending and that the recession could be less strong.
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These experts expect rates to rise in February and possibly rise again in March, but that may be all. The most optimistic consider that the market is between 90 and 95 percent of the way covered.
Energy market, another factor
Oil rose at the beginning of the week, while China continues to signal a greater opening of its economy, this factor would boost the demand for crude oil, while the markets move away from risky assets due to the sustained increase in interest rates.
WTI oil rose 1.21 percent on Monday to levels of US$75.20 per barrel and Brent oil gained 1.45 percent to US$80.20 per barrel.
Investors in the crude market view Chinese President Xi Jinping’s promise to focus on the economy as support for energy demand, even as Covid cases rise and the country’s economic reopening, as patchy.
Perhaps we are in a different scenario than in other years, this time the “Christmas rally” could be differentor even it could not be, everything will depend on what the markets interpret in the next 9 business sessions, which are the ones that remain in this volatile year.