Introduction
After seven consecutive sessions of gains, the Nasdaq recently faced a pullback, led by its favorite tech stocks. This decline raises questions about market dynamics, especially as we approach the “triple witching day”—a session where stock options, stock index futures, and stock index options all expire simultaneously, leading to increased trading volumes.
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Profit-Taking
From a technical standpoint, profit-taking is not unusual in the current context. U.S. indices, particularly tech stocks, were significantly overbought. The approach of the “triple witching day” likely prompted investors to lock in gains accumulated over recent weeks.
Fed’s Inflation Stance
On the other side of the Atlantic, there was little new information, except for comments from Neel Kashkari, President of the Minneapolis Fed, suggesting that it might take years for the central bank to bring inflation down to 2%. This could imply a willingness to tolerate slightly higher inflation in the near term, potentially aiming for an average inflation rate around 3%. In such an environment, holding real assets becomes crucial.
Interest Rates and Euro Volatility
In Europe, markets showed resilience despite geopolitical concerns and uncertainties surrounding France’s fiscal policy. This led to a potential increase in interest rates on French government bonds and temporary pressure on the euro.
Volatility on the Horizon
While the first scenario might create opportunities in the bond market, the second is already factored into our euro-dollar forecast, predicting a rate of 1.06 over three months, followed by a recovery. However, markets dislike uncertainty, and increased volatility is likely, echoing our earlier cautious stance on equities due to geopolitical uncertainties.
Key Market Indicators (June 20, 2024)
- Belgium: Bel-20: 3889.35 (+0.72%)
- Europe: Stoxx Europe 600: 518.91 (+0.93%)
- USA: S&P500: 5473.17 (-0.25%)
- Japan: Nikkei: 38633.02 (+0.16%)
- China: Shanghai Composite: 3005.44 (-0.42%)
- Hong Kong: Hang Seng: 18335.32 (-0.52%)
- Euro/Dollar: 1.07 (-0.25%)
- Brent Crude: $85.37 (-0.12%)
- Gold: $2358.69 (+1.43%)
- 10-Year Government Bond Yields:
- Belgium: 3.09%
- Germany: 2.42%
- USA: 4.25%
Conclusion
Investors should brace for potential volatility and consider real assets in their portfolios. Stay updated with daily market analyses through our newsletters.
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