The Fed vs Inflation
Investors predict Fed cuts urgently: "Waited too long"
Bond traders are now predicting that the US economy is deteriorating so fast that the Federal Reserve will start cutting interest rates aggressively - perhaps even before the next meeting in September. This is to prevent a recession, writes Bloomberg.
According to the news agency, a series of weak macro data has made the concern that inflation will pick up new momentum almost completely disappear. Instead, the market now estimates a around 60 percent probability that the Fed will panic cut the interest rate by 25 basis points within a week.
Brandywine manager Tracy Chen says the market's concern is that the Fed rested too long on the doe.
- The risk is that we go from a soft landing to a hard landing, she says.
The turmoil in the stock market is causing investors to take refuge in US government bonds. Both the ten-year and two-year interest rates have fallen significantly in recent trading days.
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Swedish interest rates
Analysis: Unlikely with an emergency cut in the Swedish policy rate
The sudden stock market freeze has raised the question of whether the Fed should lower the policy rate before the next regular meeting in September. In Sweden, the next meeting is already held in two weeks and a reduction before then seems unlikely, writes DI's Felicia Åkerman in an analysis.
"Monday's trade is dramatic, but this is neither covid nor the financial crisis," she writes.
In Aftonbladet, Andreas Cervenka writes that it gives a "slightly odd" impression to remain at 3.75 percent interest when financial panic prevails. He does not rule out the Riksbank lowering the interest rate before August 20.
"The question is whether Riksbank governor Erik Thedéen and his colleagues can even wait that long," he writes.
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The economists' advice: Don't panic - keep your savings
Last week's steep fall in the stock market increases on Monday when, among other things, the Tokyo Stock Exchange records its worst trading day since 1987. At the same time, the Stockholm Stock Exchange falls heavily at the opening. The question is now how should small savers act when the portfolio lights up red?
- The last thing you should do is panic and act accordingly, says Américo Fernández at SEB to TT.
He believes that we are seeing classic herd behavior, where emotionally driven savers risk selling at the bottom and then being forced to buy back at higher prices.
Danske Bank's senior strategist Maria Landeborn agrees.
- If you have a monthly savings, don't stop it. If we get a period when the stock market goes down a little, you buy a little cheaper. Sooner or later the stock market will turn around and then that money will start to grow again.
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Swedish savings
Equity manager: The stock market may fall more - wait to buy
Despite the fall in the stock market in the last week, it is not really buying mode for stocks yet. That's what Lars Söderfjell, the Bank of Åland's equity manager, tells Dagens Industri.
- We think there may be better buying opportunities, he says.
Söderfjell points out that US stocks are still highly valued. After Friday's close, the S&P 500's p/e ratio was 25 percent higher than the average over the past ten years.
The Bank of Åland reduced its exposure to shares in June and is now waiting for a more stable economy and geopolitical situation.
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Today's stock market
Big falls on the stock market - all red on the major company index
The Stockholm Stock Exchange started Monday with a fall of 4.9 percent. Since the day's low at 09:15, however, the selling pressure has eased and the stock market has traded in a narrow range around minus 2.5 - 2.8 percent. At 1 p.m., the index reads as follows:
• OMXSPI: −3.2%
• OMXS30: −2.8%
On the all-red large company list, SCA and Saab show resistance with moderate declines of around 0.5 percent each. At the other end, Sinch is seen with a decline of around 7.5 percent, followed by Kinnevik and SBB, which fall by just over 5 percent.
The stock exchange's only reporting company, Immunovia, falls just over 6 percent.
Friday ended with a 3.1 percent decline for the Stockholm Stock Exchange's broad index after US data sent recession worries soaring. The fear has now continued into the new trading week. On Monday, a historic stock market rally was noted in Asia, while the US is expected to open sharply lower with this year's winning stocks at the bottom.
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