Despite high levels of inflation recorded early in the week, the markets staged a strong rally on Thursday and Friday, on the wishful thinking that inflation readings may be “topping.”
Although many of the market averages are in oversold levels, despite the late week rally, still recorded its 6th losing week with the S&P Index recording a 2.4% decline.
The next two weeks should be an important test for the resiliency of the various markets, as the Federal Reserve raises short term interest rates another 1/2 point in June, and starts its monthly program of selling $30 Million bonds from its $ 9 Trillion Dollar portfolio. Although just a tiny amount of bond sales, it represents a 180 degree departure, from the easy money policies of the past years.
Also, in the background is the Covid induced restrictions in major cities in China, which may contribute to China growing at a much reduced growth rate this year. A slowdown in China would have a materially adverse affect on world trade levels, given the highly leveraged state of many Countries and Companies.
Sunday, May 15, 2022