In this article I want to take a look at the recent economy development and how it would impact the stock market. We will take a rough look at the recent reported numbers by institutions and highlight the upcoming risks. Like always, this article is no financial advice but for entertainment purposes only. With that being said, lets take a look at the recent news!
Inflation Rises, US Jobs Report disappointing
We start of with some bad news, because the American conjuncture seems to be cooling down faster than people are imagining. Last Friday the new job report was released. It was expected to see over 500,000 new jobs in September but only 194,000 jobs were reported. With this being said, over 123,00 jobs were lost on the government payroll whereas 317,000 new jobs were created in the private sector.
These news are of course not so bullish for the American economy which leads to the question. Will Jerome Powell start the tapering event in the beginning of November or not. Many experts don’t think that this will happen even though the rising inflation is creating a lot of pressure. The problem is very clear: The creation of new jobs is not going as planned and on the other hand the inflation is getting the upper hand (0.2% higher than expected; 0.4% were expected).
Lower Capital Gains by Companies
These news lead to the next event. The economy is not growing as fast anymore. This is also indicated by the following graphic:
On the one side the forecast says that the economy will grow by 5%. On the other side we see the forecast of the Atlanta Fed which estimates the economy to grow only by about 1.5%.
Furthermore, the industrial companies are getting hit with higher energy prizes and especially the tech companies are experiencing big problems in the supplier sector. In more detail the chip sector is a big problem right now. In the following graph the y-axis indicates how long companies have to wait for the chip delivery. Recently, this went up to almost 22 weeks.
All of these news can lead to the stock market drop in the next few weeks. People and institutions will start to realize their gains with the upcoming storm in their eyes and this would lead to a slight crash in the stock market.
Interesting December in Front of us
Looking into the future, we can see a very important and interesting December in front of us. A few weeks ago the U.S. managed to escape a shut down by increasing their debt limit. This would be good news, wouldn’t there be the next potential shutdown coming up in December. This is because the current debt limit was just pushed so the government could buy time. Furthermore, there is the reconciliation bill that President Biden wants to put into effect. And on top of that, there will be a virtual meeting between Biden and Xi which could lead either to release or enforcement on the tensions between China and the USA.
Conclusion
Looking at all these facts it seems like the current market heads towards a downward spiral: Due to the rising inflations and higher energy prizes and on the other side the stagnating economy we could soon see a longer bear market. Nevertheless, people that believe in their investments should still hold their shares. In my opinion this period will be over sooner than later because the demand for goods seems to be still very high and the problem is located at the supply portion of the equation. With decreasing COVID restrictions in every country, I expect the economy to be on the way to normality by middle of next year.
Posted by ga38jem on Publish0x on 10th of October 2021
Posted by ga38jem on LeoFinance on 10th of October 2021
