The US S&P 500 ended its worst first half since 1970! When will the current bear market end?
The general tone for this is: when central banks signal that an end to monetary tightening is imminent.
but don't rely too much on fed , after all it will react to market signals. It hasn't been easy for the Fed lately, as Wall Street definitely doesn't want to lower earnings expectations for the S&P 500 Index.
In other words, people are still expecting a relatively strong economy, which will leave the Fed with no choice but to continue to test monetary policy. So the hypothesis is this: When analysts slash profit estimates for a company, things may turn bright again for the stock market!
may sound strange, it has to do with the cost of the US recession. Because this would signal the Fed not to overreact to changes in monetary measures, part of its goal has been achieved. Nothing illustrates the changing monetary climate of global central banks better than the U.S. stock market's half-year balance sheet. It's not even the Fed's key interest rate level of 1.50-1.75%, but the expectation that the Fed will further tighten monetary policy. The Dow, S&P 500 and Nasdaq index fell again in anticipation of this. Capital market rates, in the form of 10-year U.S. government bonds, have risen to 3.48%, so when the federal funds rate approaches that rate, the market will change again.
If you look at the current balance sheet, it shows the decades-long "success formula" of investing 60/40 in stocks vs. bonds, so it's not going to continue like this in the long run.
The financial industry, which relies on returns, cannot sustain such performance forever.
stands idly by while cash is eaten up by inflation . You're going to have to participate somewhere, the pension fund needs income.
S&P 500 Index: A little fresh money came in at the beginning of the second half
In the last week of June, without any pretense, the S&P 500 Index of the entire market fell for four consecutive days, and only a reversal occurred at the beginning of the month last Friday.
A 12-day decline over the past 19 trading days has led to the S&P 500's worst first half performance since 1970, but the 20.25% decline, while officially a bear market, may still be too mild for a recession .
S&P 500: High Tech Weakened in H1
If you look at the industry balance sheets of the S&P 500, you can certainly see signs of deteriorating "financial conditions," with big loser High Tech and previous winner Energy.
The stock price keeps falling? The
price drop tells us that all existing price drivers are supply bottlenecks, manufacturing industry prices and rising wages! Most importantly, this leads to the conclusion that these companies are disadvantaged in all aspects of their pricing power, which is stretched to its limits when consumers are forced to save.
Inflation has hit consumer budgets hard. The stock market mainly depends on liquidity and interest rates. Then there's the matter of the company's profits and dividend payments. It is these incentives for investors that have not been overpriced in European and American stock markets in recent months as the economic outlook worsens. Interest rates rose gradually, inflation fell only slowly, and there was at most a mild economic slowdown, thus leading to a bear market in the first six months.
Now, barely noticed in the news maelstrom, prices have fallen slightly and personal consumption expenditures, the consumer spending index closely linked to the Federal Reserve, has now fallen for a third straight month.
This may be a real problem in the market. Meanwhile, many investors are worried about earnings revisions for S&P 500 companies. While the latest stock market developments increasingly point to a recession, analysts still see growth. This quarter's U.S. reporting season and outlook for future quarters will begin soon.
The bond market has repositioned
After about 10 months of rising yields and falling bond prices, the 10-year U.S. government bond, the benchmark for many U.S. credit options, has been signaling a clear change in direction over the past two weeks. It peaked at 3.48% in mid-June and is now down to the 2.8% mark! Is this a signal from the market that the Fed’s hope for a soft landing for the U.S. economy is still wishful thinking?
So there are so many uncertainties in the European and American stock and bond markets. Will the European and American property markets be a good safe haven?
Please look forward to the next episode of commentary: European and American property markets in 2022!
