The Fed’s minutes fueled the climate of uncertainty in stock exchanges. Here’s what to expect from the S&P 500 right now.
August 2023 is entering its second half, highlighting a marked bearish trend that hasn’t occurred for several months for US stock markets. The media channels are reporting a series of negative news, which is contributing significantly to intensify the uncertainty that has long surrounded the sentiment of market participants. Further weighing on market declines was the release of the latest Federal Reserve Minutes which appear to indicate a significant likelihood that the US central bank could continue to raise interest rates, against a still high inflation rate.
Faced with this economic and technical scenario, what to expect from the US stock market indices? We can find some clues by observing the S&P 500.
Fed Minutes: What Scared Stocks in the US?
The Federal Reserve (Fed) is not ruling out the prospect of further interest rate hikes, as some of its board members believe that inflation continues to pose a threat to the US economy. Similarly, the Fed’s July and therefore dated minutes did not reflect a unanimous consensus among all its members. While concerns emerged from the majority of board members regarding the persistent aspect inflation, there was no lack of alarm about the possibility that the restrictive measures adopted by the Fed could damage the integrity of the economic system.
It should be noted that inflation has been described overall as “at unacceptable levels”, a statement which suggests the possibility of future rate hikes. The release of the minutes also contributed to a decrease in the percentage of traders who expected interest rates to remain at the current level, as measured by the Chicago Mercantile Exchange’s (CME) Fed Watch Tool, from 88.0% to 86.5%, while still remaining a sizable majority.
Therefore, traders currently seem to still expect no changes during the Federal Open Market Committee (FOMC) meeting in September, however, they do not discount the possibility that at the meetings at the end of the year, there could be further interest rate hikes. This further delays prospects for potential rate cuts.
S&P 500: fear drives financial markets down
After reaching the levels of March 2022, corresponding to a maximum point also in the RSI indicator on a 14-period weekly timeframe, the price of the S&P 500, in clear technical hyperextension, lost a few percentage points, between the feeding of a climate of uncertainty among market operators. The correction comes close to a technical zone that is of great concern to analysts as it is quite convenient for bears, just think of the choice of the renowned internationally renowned investor Michael Burry, who has chosen to move a large part of the liquidity of its fund in put options on the S&P 500 and Nasdaq.
Original article published on Money.it Italy 2023-08-17 11:24:20. Original title: Verbali Fed: cosa ha spaventato le borse negli Stati Uniti?
