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2021-09-16 11:34:24

Soft pullback after strong growth

At the end of last week, American indices closed in the red after the historic highs were set at the very beginning of September. The S&P 500 lost 1.7% over the week, while the capitalization of the Nasdaq 100 fell 1%. Many market participants and analysts say they won’t be surprised if the market falls in the coming weeks or months. The S&P 500 has not corrected down more than 5% since October last year. However, on the other hand, investors understand that in conditions of extremely low rates, stocks are the best investment instruments for investing free cash. In addition, the companies went through the second quarter with excellent results, while corporate earnings forecasts for the current quarter and 2H21 were improved. The weekly decline in the US stock market is associated not only with concerns about the prospects for economic growth due to the spread of the “delta”, but also with worries about the increase in inflation, the curtailment of incentives and the continuing problem of the national debt limit.

On Wednesday, the Beige Book regional economic survey was published, which showed that economic activity in the US slowed in July-August. In particular, due to fears associated with the spread of the "delta", Americans began to travel less, and also go to restaurants less often. The situation inside the Fed is heating up. Federal Reserve Board Member Michelle Bowman said she is in favor of the early winding up of the buyback program. St. Louis Fed President James Ballard said the Fed should not abandon plans to wind down its asset repurchase program, despite weak US labor market data in August. The head of the Federal Reserve Bank of Atlanta, Rafael Bostic, who previously advocated for an early phase out of the bond buyback program, said the Fed could begin to scale back its asset-buying program this year. However, he does not expect the regulator to make a decision at the next meeting in September. Federal Reserve Bank of New York President John Williams said the US labor market has not made enough progress in recovery for the Fed to begin cutting monthly bond buybacks from its current $ 120 billion. Williams, however, expects that the American Central Bank will start curtailing this program by the end of this year.

This week, investors will expect US inflation data for August, which will be published on Tuesday. For July, US inflation was almost in line with expectations. If the statistics for August do not disappoint the market, then at the next Fed meeting, which will be held on Wednesday, September 22, the regulator may announce the preservation of the ultra-soft monetary policy, encouraging the markets with soft rhetoric, including regarding the postponement of the decision to curtail the monthly stimulus program. Empire State Manufacturing for September and industrial production for August are due in the US on Wednesday. Important data on retail sales in the USA for August is due out on Thursday. On Friday, the release of the preliminary index of consumer sentiment in the United States from the University of Michigan for September.

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