In this article, we will address three crucial points that have impacted investment decisions: the market’s reaction to the latest economic data, the influence of American inflation projections on investment trends, and expectations regarding the Fed’s upcoming decisions. We will analyze how these factors have affected the dollar, the S&P 500, and other risk assets, as well as the future prospects for investors. Follow this article to better understand market trends and make informed decisions in your investment portfolio.
The Market Decides Unanimously, Regardless of the Fed’s Discourse
At the beginning of last week, we were surprised by weak data from China and Europe, indicating an economic slowdown, while the US returned from the 4th of July holiday. However, any numbers during the week held little importance compared to Friday’s Payroll report. Expectations were high, given that we are at the peak of the American interest rate and want to see its reflection in the numbers! Thus, the market spent the entire week awaiting these data, which ultimately did not bring a clear direction to the market. We had jobless claims data above expectations, which is positive, and a Payroll report below expectations, also considered positive at the moment. But why didn’t the market react?
The Definitive Proof
The market chose not to wait and decided to believe in the positive scenario, especially after the release of American inflation data, the CPI, on Wednesday, July 12. The reality is that the US CPI came in below expectations, bringing the projection of American inflation closer to the 2% target. The reaction was immediate, with the S&P 500 rising more than 1% on that day and breaking through a significant resistance level, paving the way for a new upward cycle. Additionally, we had weak inflation data in China, and on Thursday, the US Producer Price Index (PPI) also fell below expectations, further boosting the American market to new highs.
Is Everything Decided?
The dollar experienced a significant drop, while the S&P 500 took off, signaling the moment of resumption for risk assets among investors. The bets on the CME Group make the overall sentiment even more evident. Currently, 91.8% of the bets indicate a final 0.25% adjustment at the next meeting, scheduled for July 26. Furthermore, we end the year with 58.8% of the bets indicating the maintenance of the rate between 5.25% and 5.50%, which means only one more adjustment throughout this year. This differs from the Fed’s initial plan, which had mentioned the possibility of two adjustments. Will the market get it right this time, or will the Fed double down?
In an increasingly complex and dynamic economic scenario, keeping track of market nuances and being aware of the key factors influencing investment decisions is essential to achieving solid results. In this article, we explored the market’s reaction to economic data, American inflation projections, and expectations regarding the Fed’s decisions, highlighting how the market recently made a unanimous decision independently of the Fed. By understanding these elements and underlying trends, investors can make more informed and strategic decisions for their portfolios.
Remember that continuous analysis and adaptation to market changes are essential to pursue success in investments. Stay up to date, monitor market movements, and be ready to act in line with constantly evolving circumstances. Keep following our blog to stay informed about the latest news and insights from the world of investments.