Stock Market Update: Strong Gains Across the Board – What to Expect Next
The risk appetite continued to rise with renewed strength last week. The Swedish market was up by 2.5 percent, the European Stoxx600 by the same amount. Even better, the US markets performed exceptionally well with the S&P500 rising by a whopping 3.9 percent. This has led to a full recovery of the drop seen at the beginning of August. The Swedish market still has a few percentage points to make up.
The major shift in the market is the disappearance of fears of a deeper US economic downturn, with expectations of a rate cut by the Federal Reserve on September 20. Although the probability of a double cut has decreased significantly.
While long-term market interest rates have risen slightly, the crucial US ten-year rate remains well below 4 percent.
The US volatility index VIX has also dropped to more comfortable levels after reaching alarming levels earlier in the month.
Fed Chief Speaks Out
Against this backdrop, Friday’s speech by Fed Chief Jerome Powell becomes a key event for the week. He is expected to confirm in this speech that the Federal Reserve is ready to cut rates in September, with hopes that he will also hint at further rate cuts to come. So, there is still room for disappointment in the market.
Thursday will also be a significant macro day as the preliminary purchasing managers’ indexes for August are released. While small changes are expected, surprises could trigger market reactions. Stronger-than-expected figures, coupled with low price pressures, would be a dream scenario.
Analysis: The recent market performance has been positive, with expectations of a rate cut by the Federal Reserve and strong gains in major indices. Investors should keep an eye on upcoming events, such as the Fed Chief’s speech and the Riksbanken rate decision, to gauge market sentiment. It is important to stay informed and react accordingly to potential market shifts to protect and grow investments.
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