Stock Market Rallies, Will It Crash? | by Mohamad Hakim | Aug, 2022

Stock Market Rallies, Will It Crash? | by Mohamad Hakim | Aug, 2022 #Stock #Market #Rallies #Crash #Mohamad #Hakim #Aug Welcome to Lopoid

The stock market’s meteoric recovery may signify that it is about to come to a painful crash.

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Despite the bearish outlook of the economy with threats of war, food shortages and a looming recession, the stock market closed in the green, driven by gains in the technology sector.

Nasdaq Composite surged 2.6% on Wednesday, while the S&P 500 jumped 1.6%.

Some notable mentions include Robinhood (HOOD). The company was plagued by financial uncertainties as the stock and crypto markets entered bear territory leading to layoffs. However, on Wednesday, the company gained nearly 12%.

This happened despite six consecutive quarterly losses.

This is just one of the crazy incidences in the markets today. There are zero fundamental reasons for the stock market to go green.

Don’t get me wrong, I welcome any bull run, but the unexpectedness of the markets can get quite ridiculous.

The world’s economy is still as volatile as ever, and here’s why.

The price of oil has been an indicator of inflation. At the beginning of the Ukraine-Russia war, the price of oil had inflated, leading to the rise of everyday items from transport to food.

However, as we dragged into the sixth month of the invasion, the oil price dropped to $94.23 from $120 a barrel earlier in the year.

“It’s a combination of the inventory data and a bit of worries about demand. Because the market is worried about growth more than inflation — even though inflation is still a major issue — the oil price has come down,” said Prashant Bhayani, chief investment officer for Asia at BNP Paribas Wealth Management.

A decrease in oil demand can indicate that manufacturers and major companies are taking a step back in anticipation of an economic crisis.

Consumers can rejoice in lower oil prices at the pump, which may signify that something bad is brewing.

Generally, the three-month moving average in chip sales is correlated with the global economy’s performance. Therefore, a slowdown would indicate a possible worldwide recession.

Companies like Samsung Electronics Co. are already slowing down their investment plans.

Is this an issue of a self-fulfilling prophecy whereby fear of a recession could eventually lead to a recession?

Possibly.

Semiconductors are key components in digital products, and a slowdown could mean decreased demand due to increased interest rates and tightening budgets.

Other key aspects of the electronics supply chain, such as Taiwan and South Korea, are also affected.

An inverted yield curve is a popular indicator that a recession is imminent.

…the closely watched part of the U.S. Treasury yield curve measuring the gap between yields on two- and 10-year Treasury notes reached 39.2 basis points overnight, the deepest inversion since 2000.

— CNA

The market is highly volatile, with every bit of good news sparking short-term rallies. This is indicative of irrational exuberance, a sign that the worst is to come, according to investorjunkie.com.

I welcome the short-term bull runs, but I hope none of us gets trapped into thinking that this will continue for months to come.

Anyway, I started a Telegram channel to share business and finance news and a splash of current affairs. Do click the link to join. It’s FREE!

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