August and September are traditionally considered the worst months for the stock market, said Andrey Rusetsky, Investment Director of Pervaya Management Company.
According to him, that’s what happened this year; the beginning of the week on world stock markets was marked by a massive decline in multiple regions simultaneously.
Rusetsky explained that the decline in the US market was due to several factors, including high valuations of tech companies amid expectations that investments in artificial intelligence would make money, financial reports that matched investor expectations, and unexpectedly weak labor market statistics.
“It is also worth noting that the market is basically expensive, and the expensive market is falling ‘louder’ than usual,” he added.
Pervaya Management Company Investment Director explained that the size of the US budget deficit and the current reporting season do not show a deterioration in corporate performance, so it is too early to talk about a recession.
“Markets are more likely to force the Fed to cut rates. In recent years, the regulator has only cut rates because of pressure from worsening macroeconomic indicators and a stock market decline. The sell-off occurred after Japan’s rate hike (more expensive currency) and the release of higher unemployment data in the US,” he said.
According to him, both factors reduce inflation and give the regulator room to maneuver.
The company also noted that waiting for a recession in a high interest rate environment and the possibility of reducing it is a much better option for the Fed than entering a recession with zero interest rates.
“Markets understand this very well and expect a decline. We believe that the American regulator will act according to its plan, as an emergency rate cut could send the wrong signal to the markets,” Rusetsky said.
At the same time, he noted that despite the isolation of the Russian market, domestic investors pay attention to the behavior of global markets.
“The price of oil, tactically fueled by geopolitics in the Middle East, is also important for us. A sharp slowdown in business activity in the US and Europe is more likely to lead to a decline in oil prices in the medium term, which is negative for Russia,” concluded the investment director of the Management Company Pervaya.
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Source: Gazeta
Ben Stock is a business analyst and writer for “Social Bites”. He offers insightful articles on the latest business news and developments, providing readers with a comprehensive understanding of the business world.