Stock indexes have lost about 2% in a month – that’s why it will continue
The stock market in September shows a consistent decline and growth of “bearish sentiment.” Moreover, analysts and market experts point to inflation and a set of factors that prevent the situation from improving in the coming months and quarters.
All three major US stock indexes: Dow Jones Industrial Average (DJIA), S&P 500 (SPX), and Nasdaq Composite declined on Friday, despite the release of more robust economic data on retail sales in August than market analysts expected (actual growth of +0.7% compared to July, against the forecast of -0.7%).
Month, the average decline in the market was about 2%, after its growth to several record peaks this year. The Dow Jones, S&P 500, and Nasdaq Composite lost 2.19%, 1.98%, and 1.41%, respectively. The Dow Jones index has declined for three consecutive weeks, the most extended decline since September 2020.
Experts see the beginning of a more “bear market” under the negative impact of the continued growth of inflation in the United States. Although the US government’s inflation data published on September 14 showed that prices in August decreased compared to July, the consumer price index still showed an increase of 5.3% compared to last year.
Last month, prices for airline tickets, hotels, car insurance, and used cars fell, but prices for food, new cars, gasoline, home furniture, and rent rose sharply.
Although US Federal Reserve officials convince investors that increased inflation is a normal phenomenon in the economic recovery and will be temporary, the risks for the stock market continue to grow.
What do market experts say?
A similar opinion by Michael Pond, an analyst at Barclays who heads a global study related to inflation. The risks in the coming months and quarters are likely to increase, Pond said, predicting that annual US inflation to remain at 5% in the coming months before falling to pre-COVID levels of about 2%. His forecast period for annual inflation of 2.6% is the end of 2022.
The analyst believes that problems in the supply chains of commodities and semiconductors “will keep inflation at a high level.”
In addition, BofA economists noted that companies might also face higher labor and delivery costs.
Recently, the consumer price index has been outpacing wage growth by almost 4%. As a result, investors will need to monitor the change in wages, turning temporary inflation into a structural problem.
This week reports on the US housing market, the number of applications for unemployment benefits, and data on production and services will be released.
But the most important news of the week will be the press conference of Fed Chairman Jerome Powell following the Federal Open Market Committee (FOMC) meetings on Wednesday.
Many market analysts believe that the monetary policy of the US central bank is “too soft “today and may lead to” overheating of the market.” Therefore it needs to be adjusted.
On Wednesday, investors expect the Fed to give any hints about the beginning of asset purchases cuts. Will also pay will Special attention will also be paid to inflation forecasts (especially the PCE personal consumption price index) and a “dot graph” that shows its officials’ estimates of interest rate hikes.
According to Jim Vogel, executive vice president of the brokerage company FHN Financial, investors will also closely monitor the projected decline in real GDP growth amid concerns about rising prices.
