The past week was marked by significant movements and turmoil in the global stock markets.
In addition to the delta virus rally, there is now tension over the US Federal Reserve’s stance on continuing the massive support purchases of bonds it made during the pandemic.
– Alexander Miller, chief investment officer at Odin, says the most important reason the stock market has been so strong during the pandemic is precisely all the support it has received.
The stock market and the economy have been completely dependent on help throughout the pandemic.
Next Friday, Bank Governor Jerome Powell will speak at the Bank’s annual conference in Jackson Hole.
Miller believes that everyone is now paying close attention to the signals from the US Federal Reserve.
If this safety net is lost, it is not certain that the stock market will be able to stand on its own. In the short term, this is very concerning, he says.
He thinks the US Federal Reserve is facing tough assessments.
– It’s a difficult transition. It’s like a patient in a hospital – at some point he has to fend for himself. But if you do it too soon, it can go wrong, and if you do it too late, you won’t be out of luck either.
Governor Jerome Powell will speak Friday at the central bank’s annual conference in Jackson Hole. There may be indications of how the Fed – a card to the Federal Reserve – will adjust the exchange rate in the future.
The fact that the Fed is now nearing the time when it will let go of the throttle is clearly a factor affecting the market, says Marius Gunsholt-Hoff.
He is chief economist and next chief economist at Handelsbanken.
Gunshult also points out that it’s not the support purchases that have driven inflation lately.
The rise in inflation we are seeing now is driven by factors other than support purchases. He adds that there are imbalances between demand and production capacity during the reopening, as well as some bottlenecks in value chains that have caused some price categories to rise significantly.
It also confirms that the worst pressures on prices may now have abated.
He believes that the extent of the delta virus will also be important for the stock market next week. He believes that both the virus and the turmoil surrounding Fed policy have moved the markets.
It’s a bit difficult to separate concerns about what the Fed should do from concerns about virus growth in the United States, China or Australia, he says.
On Monday, PMI numbers will also come from several countries, including the eurozone and the US. PMI numbers provide reports on the mood of purchasing managers. These often give a good indication of the economic outlook.
Nordea writes in its weekly report that the bank is “consistently expecting good numbers, in line with the continuing recovery”.
Chief Economist Gönsholt believes that although good numbers are expected, it will be possible to see growth slowing somewhat.
– Levels are still high, but may go down a bit now. We’ve been through a period of very strong growth, so it’s normal for the growth to slow down somewhat.
You have to be careful
In addition to losing US support purchases, investment manager Alexander Miller points out that the delta virus outbreak and high inflation in the US are worrisome.
There are some indications that the stock market is going up and down a bit with the contagion situation, and possibly with the inflation numbers. Investment manager Miller says that with inflation rising, there is concern that interest rates will rise.
Figures in July showed the consumer price index rose five per cent year-on-year, while core inflation was 3.8 per cent. In terms of overall inflation, it was the largest annual growth in 13 years, and the highest growth in core inflation in more than 29 years.
Despite this, a report on Wednesday last week showed that the US Federal Reserve is not worried. According to the minutes, most participants believe that the sharp increase in inflation is temporary.
Miller still believes that the Fed will have to raise interest rates in the future.
The Fed cannot sit back and watch inflation is much higher than its target. (Terms)Copyright Dagens Næringsliv AS and/or our suppliers. We would like you to share our cases using a link that leads directly to our pages. All or part of the Content may not be copied or otherwise used with written permission or as permitted by law. For additional terms look here.
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