– Just need a little spark before the mood turns – E24

- Just need a little spark before the mood turns - E24

US stock markets are swinging from a sharp decline after high inflation numbers to a strong recovery. According to the WSJ, it’s headed for the biggest shift since February.

Chief Strategist Christian Lee at Formue points to a “very pessimistic” mood ahead of today’s major turnaround in US stock exchanges.

At most, the broad S&P 500 fell 2.4 percent after another high inflation number. However, the mood quickly turned and ended the index 2.6 percent higher.

When sentiment is very pessimistic, it only takes a little spark before the mood turns, says chief strategist Christian Lee at Formue to E24.

– When you start to drop by 2 percent and go up more than 2 percent, there may be a number of players who think “I intend to use that drop today,” he adds.

to me The Wall Street Journal One has to go back to February of this year to find a bigger rally from the bottom up in a single trading day.

The major fluctuations come after new figures showed that inflation remains high in the US economy.

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According to chief economist Marius Günsholt Hof, the number slip is “not something the Fed would ever like to see.” The US Federal Reserve (Fed) is currently raising interest rates significantly and rapidly to fight inflation.

This has contributed to significant declines in the US stock market this year. Since the new year, the S&P 500 is down 23 percent, while the Nasdaq tech index is down 32 percent. All previous 6 trading days ended in red.

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CNN Index Which measures fear and greed in the stock exchange, is now in a state of “extreme fear”.

Lee believes that “extreme” pessimism in the stock market, which has fallen sharply, means that little is needed to trigger a recovery in the short term.

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– Can move up

Halfdan Grangaard, investment analyst at Handelsbanken, notes that “extremely weak” sentiment among investors is opening the way for stocks to rally in the short term.

– Everyone is also on the defensive. I think this can also provide fertile ground for us for the possibility of a bullish jolt at any time, where you get a slight improvement in sentiment and investors might move a bit – so you don’t just protect yourself from the downside.

– But even if we see such a rise, I think at least the next six months will still be very volatile. But he says there may be more two-way risks in the short term than many might think right now.

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Grangård notes that this summer the US markets rose a lot in a short time, but the rally turned lower again.

In order to achieve a more sustainable rally in the stock market, we need to see how long it will take before inflation drops properly again.

— and that central banks gradually begin to communicate that they can wait for a new tightening, perhaps see how the tightening they have already done works, and may eventually begin to hint whether they can contribute soon enough to help the economy start over, he says.

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Fear of stagnation

In September, consumer price growth reached 8.2 percent, while core inflation, which does not include food and energy prices, ended at 6.6 percent – the highest level since 1982.

Both numbers were a degree higher than economists had previously expected, according to Bloomberg.

The big problem with inflation is that the central bank has to tighten, and that could potentially lead to a sharp drop in economic growth and cause a recession, says Grangeård.

A recession is a general economic recession.

Dalila Awolowo

Dalila Awolowo

"Explorer. Unapologetic entrepreneur. Alcohol fanatic. Certified writer. Wannabe tv evangelist. Twitter fanatic. Student. Web scholar. Travel buff."

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