The US Market's Current State and Future Prospects
Have you ever listened to a market analysis session that sounds like a frightening story? Some experts predict that the US market is poised to encounter a severe fall shortly, reminiscent of 2008, when the Nifty index plummeted from 2015 to 1262, coinciding with a political transition from the Bharatiya Janata Party (BJP) to the Congress. Following this, the market experienced a recovery only after a 30-month period. Another prediction suggests that the market will decline to a Fibonacci level of 11495 based on its current value, with this period expected to last approximately 10 months—by May 2023.
While such predictions may seem alarming, especially as we hear them from noted pundits on platforms like Twitter spaces, history and experience should be treated with caution. The statement that a person with 25 years of experience may not have actually accumulated a quarter-century of experience but rather a year of experience repeated 25 times, underscores the importance of considering these predictions with a critical eye.
Historical Context
The stock market has historically shown an upward trend, reflecting the performance of the economy. US markets currently face a challenging moment, with treasury yields spiking both in the US and European treasuries. The German treasury yields, which had been negative for a long time, have become positive for the first time in recent history. These developments point to a growing concern about inflation and its implications on the equity markets globally. The decline in carry trade and the downshift in risky assets further signify a cautious economic environment.
US equity markets have experienced a decline during the third week of January. While they have recovered somewhat, the market now finds itself in a 'Death Cross Zone', indicating a bearish trend. Despite this, it’s important to note that the US markets may not fall further in the near term. Instead, a roller-coaster ride for the full year is anticipated, making it challenging for investors to generate profits due to the Federal Reserve's commitment to hiking interest rates by four times this year, which is severely detrimental to equities.
Expert Insights and Market Breadth
The US market has experienced the largest bull run in history. As of the date of writing (2-7-22), indexes are at their all-time highs. The question of whether the market has recovered from a recent drop of a few hundred points is a valid concern. While no one can predict the future, it’s important to recognize that pullbacks, although unsettling, are a normal part of a healthy market. Headline news can often cause volatility, but risk management is crucial for traders.
For detailed insights and historical data on market breadth, I highly recommend checking out the Market Breadth Post. This comprehensive resource offers valuable information that can help clarify market signals and trends for those who are deeply involved in market analysis. For a clearer understanding of the market, always rely on a wide range of data points and indicators, some of which are provided in the