Red and redder!! This is the color of the markets for this week when it comes to major U.S indices, the majority of U.S stocks, and even Bond prices. The answer for this redness and sudden movement in the market is nothing but behavioral investing.
We are looking at sentimental biasness in the markets, whereby conflicts are occurring and money transition is happening fast. Usually when we are in a Risk-Off sentimental zone investors tend to divert their interests towards safe-haven investments or at least to low risk investments and the opposite in Risk-On sentimental zones.
In other words, when we have concerns in the market we usually see increases in governmental bond prices and decreases in the stock market and major indices.
However, what we are witnessing in the market now is decreases in bond prices, whereby the 10Y US treasury yield bond increased to 1.9%, which is a value that has not been touched since late 2019. The same goes for the 2Y U.S treasury yield bond, which is currently reading 1.062%. Interestingly, these current values are exceeding the pre-covid rates.
US stock indices fell at the end of the trading session on Wednesday, decreasing from the highs made in the morning. This shows that the conflict is rising between the relation of the stock market and the bond market.
On another hand, U.S banks continue to disclose the results of their business, and the focus is mainly on 'Morgan Stanley' and 'Bank of America'.
What attracts the market's most attention in the season of corporate business results is the announcements being made by the major tech companies mainly "Apple", "Microsoft", "Alphabet" and others.
The big surprise in the tech industry and in specific the gaming sector is the acquisition of Activision Blizzard by Microsoft for USD 68.7 Billion, which shocked the investors and led activation stock price to reach gains exceeding 20% in one day.
Gold on another hand soared by more than $25/Ounce yesterday, representing the risk appetite of the investors for the first time since more than 2 months after being stable at undervalued prices below 1,830.
Next week, it is expected that the Federal Reserve will hold a meeting, which will discuss monetary policy in light of the high inflation rate and the developments of the “Corona” pandemic.
What should we expect in the first quarter of 2022? Will this be the start of the long waited downward trend, or Is this another retracement before having the big push?
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The content published above has been prepared by CFI for informational purposes only and should not be considered as investment advice. Any view expressed does not constitute a personal recommendation or solicitation to buy or sell. The information provided does not have regard to the specific investment objectives, financial situation, and needs of any specific person who may receive it, and is not held out as independent investment research and may have been acted upon by persons connected with CFI. Market data is derived from independent sources believed to be reliable, however, CFI makes no guarantee of its accuracy or completeness, and accepts no responsibility for any consequence of its use by recipients.