Wall Street continues its bear market rally, but risks remain on the downside
Wall Street ended higher yesterday after the Fed hinted that a slowdown in rate hikes could be coming soon. The minutes revealed that “a substantial majority of participants felt that a slower pace of the rise would likely soon be appropriate”, but it should be noted that “several” officials considered the terminal rate to be higher. than before.
Equity markets were supported by falling Treasury yields, a weaker dollar and a strong gain in Tesla (+7.8%). The Californian automaker took advantage of a reclassification from “Sell” to “Neutral” by Citigroup to rebound nearly 8%.
The uptrend was not unusual for Thanksgiving week, so a seasonal bias was likely another supporting factor.
Wall Street may continue its short-term uptrend, but the underlying outlook remains bearish. There is a good chance that the rebound we have been experiencing for several weeks is just another “bear market rally” and that new lows await the equity markets given the growing risk of a global recession. Indeed, between the tightening of health restrictions in China, the energy crisis and the tightening of financial conditions on a global scale, the equity markets should be increasingly under pressure in the coming months.
For the moment, a global recession does not yet seem to be priced in given the resilience of investors’ profit expectations and credit spreads.
Daily price chart of the Nasdaq 100 (CFD US Tech 100) – key levels