• US inflation hit 40-year high
• US threatens bear market
• “Buy the dip” is currently not an advisable strategy
The mood on the markets is currently characterized by concerns about the US Federal Reserve’s tightening of monetary policy in order to counteract the extremely high inflation rate. The US stock markets also got off to a very weak start in 2022.
Inflation at 40-year high
The inflation rate in the USA has recently climbed to a high for a good 40 years. According to the US Department of Labor, consumer prices rose 0.6 percent in January, while annual inflation rose to 7.5 percent, the highest since February 1982. A strong demand for goods and services is faced with enormous bottlenecks in the supply chains.
All of these developments make it more likely than the Fed’s target of three rate hikes later this year. “The interest rate shock is just beginning and interest rate expectations are too low,” said Michael Hartnett, chief strategist at Bank of America.
Danger of a bear market looms
The US stock exchanges are therefore threatened with a bear market, the Swiss financial platform cash recently warned. For this year, the International Monetary Fund (IMF) expects growth of just four percent for the United States, compared to the plus of 6.9 percent last year. Some market observers are even more pessimistic and only expect growth of a good two percent for the second quarter of 2022, as further reported by cash.
These expectations together with the monetary policy turnaround are the main reasons why the US stock market faces turbulent months. With the Fed’s primary concern being to fight inflation, investors shouldn’t look to them for guidance either. A Fed Put is currently extremely unlikely: “The idea of a Fed Put and the assumption that the Fed will always be there to vouch for my bad investment decisions is really not a sensible investment policy to hold on to for long,” explained also Jim Chanos recently told CNBC.
Against this background, the “buy the dip” strategy is currently not advisable, as it is to be expected that the weakness in the markets is far from over.
Editorial office finanzen.net
This text is for informational purposes only and does not constitute an investment recommendation. finanzen.net GmbH excludes any claims for recourse.
Leverage must be between 2 and 20
No data
More news about Bank of America Corp.
Image sources: bluecrayola / Shutterstock.com, 3000ad / Shutterstock.com