The roar of the bear may not be heard yet, but at least it's time to consider the risk of a large margin.
Goldilocks "is not a fairy tale, the US economy is in this state, but will such an economy have a happy ending?"
* Answer "Yes". Last week, the S&P 500 accumulated **11%, closing near all-time highs, Nasdaq Composite**09%, Dow Jones Industrial Average **065% and hit a new high.
The next week is coming, but **continue**. The Federal Reserve will announce its interest rate decision on Wednesday (January 31), and the probability of a rate cut this month is low, and the Fed *** shows that the probability of a rate cut by the Fed in March is less than 50%. * Doesn't seem to care what the Fed has to say at this meeting.
U.S. stock market trends last week
At the same time, the company's earnings performance was mixed. Tesla's (TSLA) shares fell sharply after the earnings report, while companies such as Intel (INTC) saw their shares sharply** after the earnings report. Apple (AAPL), Amazon (AMZN), Microsoft (MSFT) and Alphabet (GOOGL) are due to report earnings this week, but investors don't seem to be worried about their results.
on the Internet.
*Continued even in the face of strong economic data** without thinking about what it means for the Fed. Data released last week showed that the US GDP grew by 33%, up from 18% expected, especially for small-cap stocks) followed. In addition, Citigroup strategist Scott Cronert noted that the U.S. Economic Surprise Index (Us.The Economic Surprise Index has been with the S&P 500 lately, which is a very good sign for the S&P 500, with Cronert saying: "The bottom line is that the reaction to better-than-expected macro data has been positive, so the bad news on the economic front may not be as good news as it was for most of the second half of 2023." ”
In fact, investors need to worry about the bad news, especially given the signals from other parts of the market, such as US Treasuries, where the two-year US Treasury yield edged lower to 4 last week345%, meanwhile, the yield on the 10-year Treasury note rose slightly to 414%。At present, the difference between the two yields is only 02 percentage points, the lowest level since late 2022, also means that the yield curve is about to break the inversion pattern.
Long-term bond yields are typically higher than short-term bond yields because long-term inflation and interest rate uncertainty are higher, so investors demand more compensation. An inverted yield curve – where short-term bond yields are higher than long-term bond yields – usually signals a recession. Therefore, the end of the inversion means that the market expects the Fed to cut interest rates and the long-term economic growth to be stronger.
However, the lifting of the yield curve inversion pattern is not necessarily good news for **. In the last 44 years, three of the eight cases in which the yield curve has lifted this pattern after inverting for at least three months, two of them have been 10% or more in the following 12 months.
The yield curve uninverted pattern could even signal a recession, although it seems unlikely that the U.S. economy will fall into a recession at the moment. In fact, recessions usually come nine months after the yield curve inversion is at its worst (in mid-2023), which means that a recession may come soon.
Doug Peta, strategist at BCA Research, said: "The U.S. economy is going to be in a recession in 2024, and I think we will lose the support factor of 'the economy continues to grow.'" ”
Even without a recession, a downturn in economic data could weigh on the S&P 500, which is currently 22% above its 50-day move**, suggesting that the index is well above recent trend levels, which tend to signal a significant increase in the past few years, according to FactSet.
Although investors have not yet heard the roar of the "bear", it is time to at least consider the risk of a large **.
Text |Jacob Sonamsien
Edit |Guo Liqun
Copyright Notice: Barron's original article, without permission, may not**. For the English version, see January 23, 2024** "The Stock Market Celebrates Good News." it may not last.”。
The content of this article is for informational purposes only and does not constitute investment and financial advice of any kind; The market is risky and investors should be cautious. ）
Market analysis.