June swoon is more likely than not for stock market
[ad_1]
The stock market is usually quiet in June, which could be an improvement on the spring’s chaotic swings. Due to Fed Reserve rate hikes and economic uncertainty as well as geopolitical events and geopolitical issues, it is likely that June will not follow its historic pattern of low volatility with shallow gains. Analysts say that even though the market may rally, this will likely be temporary. Since 1945, according to CFRA, the S & P 500’s average June gain of 0.14% is in the bottom third in terms of monthly performance. Average stock prices are 55% higher in June than they were during December, which is the second-lowest month gain. Also, average volatility was very low and the average stocks rose only 1% per month. In May, the stock market was up 0.2%. It would have negative returns in four of the next twelve months if it had closed on May 31st. According to Sam Stovall, CFRA chief investment strategist, the S & P has on average declined in June by 1% in the years that already included four or five months of losses. Stovall predicts more uncertainty and choppiness for June. We have not reached the bottom of our opinions. “We haven’t really had the shakeout that we need.” he stated. Markets are watching closely for Fed comments as it appears that the Fed will raise interest rates another half percentage point at its next meeting on June 14-15. On Tuesday, Christopher Waller, Fed Governor said that he was prepared to raise rates by 50 basis point and increase the Fed funds rate to neutral in order to combat inflation. This created anxiety in an already nervous market, which was rattled Tuesday by the rise in oil prices. The European Union had announced that it will ban all Russian imports. West Texas Intermediate crude oil futures rose more than 2% and traded above $117 per barrel at midday. Because oil boosts energy stocks but also drives up inflation, it is a dual-edged sword that can be a problem for the stock markets. As China resumes its Covid-19 lockdowns ends, tensions could escalate as China taps into the global oil markets for additional fuel. In June, markets will be nervous about news regarding Russia’s invasion and possible repercussions. Quincy Krosby (chief equity strategist, LPL Financial) said that it is important to be cautious about a peaceful summer when geopolitical matters are concerned. She pointed out that China, besides the Ukraine conflict, is increasingly aggressive in flying into Taiwanese airspace. Krosby stated that June will not follow the historical norms. According to her, “Nothing is normal now.” “The market is trying decode where we’re headed in terms economic growth. It will be difficult to tell if we are heading towards a recession or a crisis of growth. She noted that economic data is crucial, beginning with Wednesday’s ISM manufacturing data. Krosby stated that ISM data “have an excellent positive correlation not only with the economy, but also with the market.” It is important to pay attention when they place new orders. It is important to pay close attention to the hiring needs of these companies. These give you an idea of how companies think and what they see. According to Dow Jones, ISM manufacturing will fall to 54.5 percent from 55.4. The Friday May employment report will be next on the economic calendar. According to economists, 325,000 new non-farm jobs were created in May, as compared with 428,000 in April. The Fed will monitor the response of the labor force to rate rises closely by collecting data on jobs. It could weaken and increase the risk that the Fed will slow down the economy. Krosby noted that the headwinds are still present and the hope was some of those headwinds (such as supply chain restrictions) will be eased. The May consumer price index, which will be published on Friday June 10, is expected to come out in the short term. This could provide important information as CPI had peaked in March. While a hotter result than anticipated would have a negative impact on a market’s confidence, a more moderate number might calm worries about the Fed’s future actions. Two-day Fed meeting, which begins June 14, could prove to be the most important event in the month. A half-percent rate increase is expected by the market, but that should not be taken as a surprise. It is not yet known what the Fed will announce when it publishes its economic projections or interest rate forecasts. Jerome Powell, Fed chair will address the gathering. Krosby said that “a headline could change our trajectory.” He also stated that Powell’s statement that the Fed expects an increase in inflation would have a positive effect on stocks. These comments are what the market wants. Stovall stated that investors will be more optimistic if the Fed is going to increase rates and then halt tightening. This outcome is not certain. He said that there is still uncertainty, and there is a tug-of-war between bears and bulls. “If there isn’t a complete monthly big move in the stock market, it will still be volatile.”
[ad_2]