The US stock market and the markets in Germany and Austria are still in a bear market, the final sell-off of which has not yet taken place. This can come as a surprise, however, which is why investors can already familiarize themselves with signs of a turnaround and potential bargain-hunting candidates.
ATX, DAX and NASDAQ are each 30; 21 and 24 percent in the red. Record inflation, war and the first three interest rate hikes in the USA characterize events and the likelihood of a recession reported in the media is increasing. The IMF therefore revised its US economic growth forecast for 2022 from 3.7 to 2.9 percent on Friday and lowered its expectations for 2023 from 2.3 to 1.7 percent. For 2024, the IMF assumes only 0.8 percent GDP growth in the USA. This is also in line with a provisional evaluation of the purchasing managers’ index for the private sector (S&P Global Flash US Composite PMI), the data for which indicates that GDP growth in the USA will be 1 percent in June. Increasingly inverted yield curves are already warning of a recession. However, the inflation rate in the euro area reached a new record high of 8.6 percent in June and the ECB has hardly reacted, only announcing a first key interest rate hike of 25 basis points for its meeting on July 21st. If inflation stays the same or even rises – which was the case recently with the jump from 8.1 to 8.6 percent – the ECB is considering even larger interest rate hikes for September. The fact is that the Fed raised its key interest rate by 0.75 percentage points to between 1.50 and 1.75 percent in June – the highest rate hike since mid-November 1994.
We are thus faced with a race between further fighting inflation and continuing the downturn. The latter might prompt the Fed to pause interest rate hikes or even cut interest rates. Already the first hints in this direction might trigger price fireworks on the stock market. But until then, the stock markets are still in a downward trend.
Read more in the July print issue of risControl
