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It's A Good Time To Watch How Are Stock Prices Determined In Changing Circumstances (Feat. S&P 500 Chart)

It's A Good Time To Watch How Are Stock Prices Determined In Changing Circumstances (Feat. S&P 500 Chart) | FXMAG.COM
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Financial markets are clinging to positivity on Monday morning after a modest rise on Friday. Robust US labour market data reinforced expectations that the Fed will press the monetary policy brake harder. However, this news is countered by optimism that a strong labour market will allow the economy to avoid a recession by providing a soft landing. Furthermore, buyers' interest is supported by China's confirmation of cooperation in the audit of local companies according to US regulations.

April has been described as a historically favourable month for equity markets, so the warning signals from outside are so far dissipating into buying streams after the correction at the end of last week.

Against the market at the end of March, there was profit-taking activity after the more than 11% growth for S&P500 and an even sharper recovery for European and Asian indices from the March lows. The resurgence of positive sentiment among participants is setting up that buying near the close of trading on Friday and early on Monday is a sign of the end of the mini-correction, which will be followed in the coming days by a renewal of the late March highs. However, there are serious doubts about the market's ability to sustain the positive momentum in a broader context.

it s a good time to watch how are stock prices determined in changing circumstances feat s p 500 chart grafika numer 1it s a good time to watch how are stock prices determined in changing circumstances feat s p 500 chart grafika numer 1

Fed officials say they are considering a 50 point rate hike at the start of May and kick-starting the selling of securities off the balance sheet. The Fed raised the interest rate by 50 points in one meeting in May 2000, cementing the dot-com bubble's melting down for the next three years.

Regarding China and the US, we should also be under no illusions. Over the last four years, we have seen many periods of truce, but the general trend towards more confrontation has continued, albeit along a somewhat winding road.

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An essential ally of the stock market is a strong economy. Investors are shifting capital from bonds to equities as a growing economy makes it possible to count on rising corporate earnings. However, this could prove to be a death trap for bulls. By buying now, they are pushing up equity indices, signalling to the Fed that markets are ready for a tightening. Historically, central banks in similar circumstances have tightened policy until markets are stressed, and economies are on the verge of recession.


Alex Kuptsikevich

Alex Kuptsikevich

Financial market professional with 16-years' experience and Senior financial analyst at FxPro. Author of daily reviews on the impact of economic events with comments regularly featured in top international and Russian media. Covers fundamental analysis, global markets, foreign exchange market, gold, oil, cryptocurrencies.

Alex Kuptsikevich is a regular contributor to both digital and print media including CNBC, Forbes, Reuters, MarketWatch, BBC and Coindesk.


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