CAN THE US STOCK MARKET AVOID FALLING INTO THE ABYSS?

C

The situation in the world markets remains moderately optimistic. This positive attitude of investors is supported by the firm opinion that against the background of the difficult situation on the labor market in the United States and the American economy, Congress will have no choice but to make a decision to approve the interest-free measures proposed by Jое Biden to support the national economy and American citizens in $ 1.9 trillion.

This belief is strong, and it continues to push the US stock indices up, and weakening the dollar. But during the past week that doubters have begun to appear in the ranks of investors who are not sure that support measures will be taken exactly in the proposed volume of $ 1.9 trillion. They believe that Congress can “cut” this amount. Moreover, not only representatives of the Republican Party but also some from the Democratic Party will be against such unprecedented expenses. This can also happen due to the reason that Congressmen understand that such spending will not solve the problems of the country’s economy, which was primarily under the blow of COVID-19, but will only increase the size of public debt and stimulate the inflation of financial bubbles in the markets.

This process cannot go on forever. It will ultimately lead to the collapse of these bubbles and a collapse in the domestic financial market in America and in world stock markets, compared with which the crisis of 1929 will seem like a child’s prank.

The process of dumping the American economy into the abyss can halt. The only way to help avoid that will be the vaccination of the U.S. citizens, but this process is extremely slow right now. The euphoria that was present in the markets at the end of last year completely disappeared and turned out to be premature. That is why we are witnessing the establishment of a certain equilibrium in the markets, which, as I previously thought, contributes to the overall preservation of the period of consolidation. The only asset that receives support from the current situation is the high-tech NASDAQ 100 index. It mostly includes stocks of companies that won during the acute phase of the pandemic last year and received support in the wake of expectations of improving relations between the United States and China, which is quite reasonably associated with the coming to power of the Democrats, whose economic model is based on close economic cooperation between the countries.

What to expect soon:

Observing everything that happens, I believe that the overall picture on the markets before the Fed meeting, which will be held on Tuesday and Wednesday and before the start of the vote in Congress on incentives, will generally remain the same


By Maksim FXbro