Stock Market Forecast For The Week Ahead: Will Risk Appetite Recover?

Chart, Trading, Forex, Analysis, Tablet, Pc

STOCK MARKET FORECAST FOR THE WEEK AHEAD: NEUTRAL

  • The Dow JonesNasdaq 100 and S&P 500 will look to recover from last week’s turbulence
  • Inflationary fears have pressured risk appetite across asset classes and traders will look to the upcoming Fed minutes for further insight
  • Stock Market Seasonality: Should you sell in May and Go Away?

The Dow ones, Nasdaq 100 and S&P 500 endured considerable volatility last week as the three indices declined roughly -1.1%, -2.3% and -1.4% respectively. White-hot inflation data was largely to blame for the initial wave of selling as investors reassessed the Fed’s policy path given new economic readings. As the week progressed, disappointing retail sales and consumer confidence data helped to soothe hawkish fears and the indices were able to close the week off the lows.

That being said, the fundamental forces that were driving price action last week will likely persist into the weeks ahead as market participants attempt to gauge precisely when the Fed will look to shift its policy path. Fed Chairman Jerome Powell has repeatedly stated any change would be communicated well in advance which has led investors to suspect recent hawkish remarks from some Fed officials could be the start of that communication. Crucially, there has been no official statement and the commentary was only slightly hawkish.

NASDAQ 100 TO DOW JONES RATIO – GROWTH TO VALUE ROTATION VISUALIZED

Stock Market Forecast for the Week Ahead: Will Risk Appetite Recover?

Nevertheless, the concern has put investors on edge and sectors of the market that are particularly exposed to more hawkish policy – namely those with lofty valuation metrics – were firmly on the backfoot last week as a result. The phenomenon is just another leg of the ongoing reflation trade that has seen investors exit growth in favor of value which has led the Dow to outperform the Nasdaq. Risk appetite was also curtailed elsewhere as investors shy away from popular growth trades like Cathie Wood’s ARKK fund.

1 2
View single page >> |

Disclaimer: DailyFX, the free news and research website from IG, is one of the world's leading sources for news and analysis on the ...

more
How did you like this article? Let us know so we can better customize your reading experience.

Comments

Leave a comment to automatically be entered into our contest to win a free Echo Show.