Global markets recover after heavy negative
At the start of trading on Thursday the market is a positive attitude. However, it says nothing, because in the previous five trading days we have observed that the positive morning disappears in the middle of the American session. Moreover, while markets keep pressure on the tech stocks of companies that, in turn, pulls the index down.
This change of favourites reflects the transition to the next phase of the market cycle, where the participants are more focused on fundamentals of companies, not limiting the choice only the fastest growing of them.
This is a clear signal that raising interest rates the fed is forcing investors to think about the prospects of the firms after the end of the era of “easy money”. Not by chance “October sale” was launched with the help of review by the fed, which hinted that rates could exceed the neutral level.
Yesterday from the fed, we heard another batch of statements. So, Powell again called the economy “really strong”, supporting market expectations in respect of the December rate hike. Among other reviews, you should pay attention to the “concern about the growing corporate debt”.
The main tool in the fight against excessively rapid growth of corporate debt is the notorious increase in rates – and that’s a bad sign for the “growth stocks”. Overly rapid changes of values can quickly translate market the next phase at which demand so-called “defensive stocks”, and the drop in demand is evident in the last turn.
Now investors will scrutinize new data on retail sales in the United States in search of the answer to the question whether slowing of consumer demand or not. In such a situation, the weak performance can increase the wariness of the markets, increasing the pressure on “growth stocks”.