Main events in the financial markets of the past week

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Main events in the financial markets of the past week“This week has been brutal. Let me put it briefly – we are in a recession. This is a mild recession. It’s not an official recession, according to the statistics office, certainly not yet, but the first half of the second quarter is negative GDP growth, which continues to decline,” said Jeremy Siegel, professor at the Wharton Business School . “For many investors, the recession has become a short-term fatality. The only question is its duration and the severity of its impact on results,” wrote Chris Harvey, head of equity strategy at Wells Fargo Securities in Friday’s commentary.

Another weak week on the stock market. Why?

  1. On Wednesday, the Fed raised interest rates by 75 basis points, the biggest hike since 1994, and lowered its growth forecast for 2022 to less than 1.7%. It also raised its inflation forecast to 5.2% this year, while dropping to 2.6% in 2023 and 2.2% in 2024.
  2. Meanwhile, the S&P 500 officially entered bearish territory this week as it fell 23% year-to-date. This seems to suggest that the market is pricing in a US recession this year due to energy and food inflation amid continued supply constraints due to ongoing Covid restrictions in China. Recession fears are spreading around the world as the Bank of England and the Swiss National Bank hiked interest rates on Wednesday. Stocks, which initially rallied after the Fed’s announcement, fell again, suggesting that a sell-off in stocks may continue until there are clearer signals that the inflation weakens. The impact of the above on stocks of technology and development companies such as Tesla, Amazon, Nvidia, Shopify and Roblox Corp, where valuations appear most stretched and investors worry about future profitability as the ‘economy slows down and the cost of capital rises, will continue to be negative.
  3. ECB under pressure. The ECB held an extraordinary meeting on Wednesday to address the growing risk of fragmentation between sovereign bonds in Europe as Italian bond yields rose above 4%, the level most recently seen during the 2014 sovereign debt crisis. , he promises to “accelerate the completion of the design of the new anti-fragmentation instrument” to support the most indebted countries in the euro zone.

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  4. A deep throwback to the cryptocurrency market. Bitcoin and Ethereum holders are once again in terrifying territory as the cryptocurrencies suffered their second crash this week this year. Crypto exchange Binance has temporarily held back Bitcoin withdrawals while crypto exchange Coinbase slows nearly 20% of its workforce. In turn, lending platform Celsius blocked customer withdrawals. However, it may be too early to say that this is the end of cryptocurrencies. The market is still worth close to $1 trillion. Events this week should trigger an acceleration of regulation, including increased investment coverage and transparency.
  5. Market declines were accompanied by heavy selling, primarily in Friday’s WTI Crude Oil session, the rate at times even lost more than 6% and fell several percent from the local high of 123 -110.

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