While the US stock market is bracing for a recession, several market experts are expecting this to be a mild one.
Having been closed for a holiday on Monday, the US stock market resumed Tuesday’s session with a mixed performance with the Nasdaq Composite (INDEXNASDAQ: .IXIC) soaring by 1.75% to 11,322.24 to lead gains.
The S&P 500 Index (INDEXSP: .INX) also closed in the bullish zone by 0.16% to 3,831.39. The performance of the S&P 500 is a rather impressive one as the index was trading at a 2% loss for the better part of the trading session. Of the major indices, the 30 stock index, Dow Jones Industrial Average (INDEXDJX: .DJI) underperformed when compared with its peers.
The Dow closed the session down 0.42%, shedding 129.44 to 30,967.82. Despite the performances, futures tied to these US equities remained largely unchanged on Tuesday as futures tied to the S&P 500, Dow Jones, and Nasdaq Composite were all close to the flatline.
The underlying reaction to the market by investors is hinged on the fears that a recession might be just around the corner. Since the Federal Reserve tapered down on its Quantitative Easing program, it has continued to raise interest rates in a bid to curtail inflation. With the CPI reading topping 8.6%in May, there is little evidence that the consistent rate hikes are generating the expected results.
″[The market] has been bracing for [a recession], and now it may actually be embracing it, the idea being: let’s just get it over with, we’re going have a recession, let’s do it. Let’s clean out the excesses and start all over again,” said Ed Yardeni of Yardeni Research on CNBC’s “Closing Bell: Overtime”.
So many key economic data are bound to be released today with more anticipated Feds minutes for the month of June. Should the data point to a negative trend, many investors may start gearing up for next year.
“The market starting to look ahead into next year and that could very well be a recovery year from whatever this recessionary environment turns out to be,” he added. “We’re all kind of doing a Hamlet recession – to be or not to be. I’m kind of thinking that there’s going to be a mild recession.”
The Future of the US Stock Market
Every notable monetary action taken by the US Federal Reserve affects the stock market in a lot of ways. Many are predicting there will be a pivot at a time when the Feds may retrace its steps should the inflation reading continue to get worse.
While the US stock market is bracing for a recession, several market experts are expecting this to be a mild one.
“Do we have a kind of drawdown that looks to be in that 30% range, which is the average for recessions, or something that looks closer to down 50%, which is what we saw back in the early 2000s and 2008 where we had two debt crises?” said NewEdge Wealth chief investment officer Cameron Dawson. “We don’t see a debt crisis. We think that we could start to find some value around that 3,400-3,500 level because that’s what gets us back to the pre-Covid highs.”
Benjamin Godfrey is a blockchain enthusiast and journalists who relish writing about the real life applications of blockchain technology and innovations to drive general acceptance and worldwide integration of the emerging technology. His desires to educate people about cryptocurrencies inspires his contributions to renowned blockchain based media and sites. Benjamin Godfrey is a lover of sports and agriculture.
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