The Nasdaq 100 saw its best 2-week rise since the early 2000s dot com bust, the S&P 500 and Dow Jones followed. The road ahead remains tough with US PCE and non-farm payrolls data in focus. Get your weekly equities forecast from ddubrovskyFX here:
Is this the end of stock market pain for now? Some of the most aggressive market rallies can be found in a bear market. 2018 and 2020 offer recent examples. In 2018, when the Fed raised interest rates 4 times, the S&P 500 found a low early in the year before. Then, the index fell swiftly into a bear market to wrap up the year, dropping over 20%.
The central bank then reversed its policy in 2019, unwinding the series of aggressive rate hikes. This led to a strong year for the stock market. According to Bloomberg, US CPI is expected to rise 6.2% y/y this year, falling to 2.6% in 2023. It remains to be seen how far inflation could cool later this year. For the time being, monetary policy remains increasingly against the favor of risk appetite.
Ahead, all eyes are on US PCE and jobs data. The former is the Fed’s preferred inflationary gauge, and the core reading is expected to clock in at 5.5% y/y. Although this data would largely ignore the potential impact of Ukraine. March’s non-farm payrolls report will wrap up the week. Average hourly earnings are expected to rise 5.5% y/y from 5.1% prior. Further strong price signals may underscore the Fed’s hawkish rhetoric, risking stock market volatility.
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