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Are U.S. Markets Set for a Bullish Turn?

Plus500 | Tuesday 05 April 2022

On Monday, major U.S. Indices moved into the green over the course of the trading day. Wall Street’s nearly-month-long upward trend continued as this week began despite significant concerns about global market volatility.

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Indices to Continue Uptrend?

The first three months of 2022 took a toll on American equities, among other sectors, as concerns emanating from the conflict in Ukraine, the COVID-19 epidemic, and record-high inflation combined to create a risk-averse market mood on Wall Street. However, with Monday’s stock value jumps continuing the generally upward trajectory New York Indices have been on since mid-March, some analysts are predicting a turn for the bullish on the trading floor.

On Monday, the S&P 500 (USA 500) rose 0.8%, the Dow Jones Industrial Index (USA 30) by 0.3%, and the Nasdaq (US-TECH 100) by 2% over the course of the trading day. These share price boosts may be part of a long-term pattern, with April historically being the best month of the year for the stock market. 

Much ink has been spilled in the major organs of financial journalism in recent months on the possible implications of the intense conflict in Ukraine for the global economy. As the Russian Federation has been progressively cut off from wider trade relations by Western sanctions as well as a wave of corporate divestment, many analysts posited that supply chain issues and energy shortages could have a deleterious effect on U.S. stocks. However, this has not been the case in recent weeks.

Inflation Concerns Continue

Another major area of concern for those watching American equities has been inflation rates which have reached levels not seen since the early 1980s. Federal Reserve Chairman Jerome Powell and the other members of the Federal Open Market Committee (FOMC) have had to walk a tight line when setting the course of U.S. monetary policy. They have had to navigate between the urge to rein in inflation and the fears that rapid interest rate hikes could push the U.S. economy from post-coronavirus recovery into recession. 

However, since the FOMC’s last meeting in mid-March, the minutes of which are set to be released tomorrow and which concluded with a decision to hike interest rates for the first time since before the COVID-19 pandemic, U.S. Indices have been on an uptrend. Analyst opinions with regard to the implications of this pattern are mixed; some say the American economy is set for a slowdown, while market experts from JPMorgan (JPM) hold that equities are still more likely to head upwards despite significant geopolitical volatility. This latter view jives with the analysis put forth by other economists that U.S. Indices generally turn out to be resilient in the face of political unrest.

One further sign for near-term optimism on the trading floor could be the conclusions drawn by some from two- and ten-year Treasury yields. Both of these yields, when placed on a graph, show an inverted curve pattern, which traditionally signals an approaching recession. However, according to one strategist, Barry Knapp, a more in-depth analysis shows that these financial signals presage lower inflation in the coming year rather than lower growth. So far, one major tech company seems to be leading the pack with regard to growth.

Twitter Leads Stock Boost

Surprising news shook the tech sector yesterday and could have contributed to the overall positive numbers posted by Wall Street Indices. According to a Securities and Exchange Commission document released yesterday, Tesla (TSLA) CEO Elon Musk, whose electric pioneer firm has posted impressive growth numbers so far this year, now owns 9.2% of Twitter’s total stock.

In response to the news, Twitter (TWTR) stock jumped 27% on Monday, outpacing the general rise in U.S. Indices. Given Musk’s prior criticisms of the social media platform’s content policies, some foresee his large purchase of Twitter shares leading to the tech leader having a greater say in the firm’s future decisions, despite his passive stake in the company. Some even believe that this desire for influence in the Twitter boardroom could have been behind Musk’s decision to buy up so many shares.

All in all, it remains to be seen whether Monday’s impressive performance on Wall Street can be repeated when so many factors are still unclear. Whether analysts’ bullish predictions come to fruition depends, in large part, on developments in Eastern Europe, the continuing COVID-19 pandemic, and whether the Fed is successful in taming inflation while keeping the American economy from sliding into negative growth territory. Investors will have to wait and see.


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