Will the S&P 500 close above 4000 for the week?
Abraham George Market Musings
Yesterday the minutes of the Fed May meeting were released - they are more hawkish than most of us would have expected. However, the release of the minutes coincided with a rise in the stock markets too. This is very important. It clearly shows how oversold the market is.
It is clear that the Fed will raise by another 50 basis points in June and July. They are also confirming that they will start reversing QE from June 1. My initial thought was that the Fed will stop hiking with the May hike but it looks like surely there is a hike in Jun for 50 basis points. We will have to review the situation after that and how economic data stacks up. The Fed clearly is attacking the demand side of the economy and it is easier for them to do it as it is leveraged. It is already showing up in housing demand as mortgage rates have more than doubled from a year ago. The market could be already in a recession as we don’t know. Nobody rings a bell at the top.
I don’t know how and when the Fed will pivot w.r.t. the interest rate. Just like they switched to hiking rates they can go back to being neutral. The current rhetoric is very strong and probably they are purposely keep it that way to keep stock markets contained.
A break and close above 4000 in the S&P 500 should be fairly bullish for the markets. It will be a move away from seven consecutive down weeks with each week having made a break below the previous week’s low.
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Abraham George is a seasoned investment manager with more than 40 years of experience in trading & investment and multi-billion dollar portfolio management spanning diverse environments like banks (HSBC, ADCB), sovereign wealth fund (ADIA), a royal family office and a hedge fund. Currently, he is a co-founder of a new hedge fund where foreign citizens can invest in Indian growth stocks like Tanla operating in hyper-growth markets like CPaaS.