StatWeek

  The calm before… Considering the backdrop of a potentially havoc-wreaking US government default, stock markets are remarkably  quiet . Indeed, US stocks have been calm all year, swaying only gently from side-to-side on any given day. The sharpest drop in the flagship  S&P 500 Index  came on February 21st, when the market fell  2% . Last year, on the other hand, a 2% drop would have been the  24th worst day , and of course it’s absolutely nothing compared to the  ~8% ,  ~10%  and even  12%  falls that we saw in 2020, during the early days of the pandemic. The  Wall Street Journal  blames the robots for the calm, citing a rise in systematic (algorithm-driven) investors, which have pushed markets higher, as discretionary investors sit on the sidelines. Reasons to (not) worry In addition to the debt ceiling, the current crop of top concerns includes ongoing geopolitical conflicts, still-high inflation, how the impac...

 

 

 

 

 

  I believe the market will begin to digest the real possibility that its expectations of a Fed pivot are way off. If that happens, we’ll likely see downward pressure on stocks. That’s what the chart below suggests… The blue bars show the current projections for interest rates by year’s end. Most of them have ticked up since last week. If this trend continues – and I believe it will, at least for the next few weeks – we’ll likely see prices dip further.