Newsletter: No hedge
How the most important market trends and the best spirit of Wall Street respond to them. Weekday delivery.
The US stock market has made the smallest quarterly progress since the pandemic struck the global financial markets last year. Investors faced the reality that some of the main drivers of a long-term rally could soon decline.
The good S & P 500 index of large companies increased this quarter by just 0.2%. This is far from what the average investor was accustomed to during the last year and a half of the rally. The loss in September, when the index suffered the worst monthly performance since the bottom of the crisis last year, dragged the S & P 500 almost into the red during that period.
Emphasizing the poor performance was the fact that more than 260 companies in the index fell in value during this period, including large companies such as Amazon and Facebook.
This move suggests that investors are aware that the main propellant for the rally may soon be removed. Central bank stimulus, worth hundreds of billions of dollars each month, helps raise stock and bond prices. The Federal Reserve Board, after its latest policy meeting last week, has shown that the economy is strong enough to begin shrinking its bond-buying program and ultimately raise interest rates.
“The game works until it doesn’t work, and it works until it doesn’t work .. .. Mike Lewis, Head of Barclays US Equity Cash Trading, said:” I’m real. We were able to see the stock market drawdown. You have taken the accommodative action of a globally coordinated central bank for 14 years. “
As the quarter ended, investors increased their list of concerns, Central banks around the world It could spark a tougher monetary policy Sale in bond market It bounced back into the $ 50 trillion US stock market.
Nonetheless, stocks of healthcare and financial services companies provided support with the S & P 500 lift provided by some of its largest components, including Tesla and Google’s parent alphabet.
But as the quarter ended, we got a glimpse of how investors would behave in the world of monetary tightening policy. Growth-sensitive small caps and transport stocks closed below the quarter, but both began to dramatically outpace technology-dominated S & P 500 on the last day of September.
The benchmark S & P 500 suffered the first monthly loss since January and the largest decline since March 2020, when the pandemic shook the global financial markets.
Ralph Bassett, Head of North American Equity Division at Abrdn, a $ 700 billion asset manager, said:
Equities remain a port of call for individual and institutional investors, even in the face of growing concerns, according to EPFR preliminary data, with funds buying U.S. stocks inflowing more than $ 40 billion quarterly. I’m counting.
Volatility market indicators have risen after declining from their highs at the beginning of the year.More turbulent transactions have been driven by concerns about how Chinese real estate developers default. Evergrande What could spill over and how slowing economic growth will affect the market.
Mr. Bassett said the economy was fundamentally strong, but investors “tension between wanting exposure to growth and rising interest rates and potentially headwinds at discount rates. I was working on a way to balance.
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