KUTAY KORAP / BLOOMBERG HT RESEARCH
Rising inflationary concerns in global markets also raise expectations that central banks will respond more aggressively.
While more than 60 central banks have raised interest rates by 50 basis points or more since the beginning of the year, the strongest tightening moves in recent years are causing liquidity to dry up.
Fed-led moves and verbal directions from central banks; This raises concerns about the company’s growth, liquidity, valuation and profitability. This creates serious withdrawals from record stock levels.
The market value of Bloomberg World Stock, which hit a record high of $ 122 trillion in November 2021, fell to $ 100 trillion as a result of the latest market moves.
During this period, the market value of $ 22 trillion was dissolved, including $ 12 trillion in US stocks, $ 1.9 trillion in China, $ 1.5 trillion in Japanese stocks, and $ 800 billion in Hong Kong stock exchanges. Kong. The depreciation of the main European indices reached 3 trillion dollars.
Strong fall in the Wall Street indices
After the pandemic, there are strong retreats in the Wall Street indices, which are trading well above historical averages based on monetary expansion, valuation and multiplier.
The Dow Jones was down 18% from its peak, the S&P 500 was down 22% and the Nasdaq was down 33%.
As the magnitude of the pullback, which began at the peak in late 2021, deepens, the talk of the cycle of rising interest rates and tightening balance sheets are particularly effective.
Since the beginning of the year, the Nasdaq technology index has fallen by 30%, the S&P by 20% and the Dow Jones by 15%. With the latest drop, the Nasdaq P / E was a multiplier of 22, Dow Jones 15.9; S&P is trading at 16.4. Therefore, it reverted to 12-month estimated P / E ratios versus 10-year averages across 3 main indices.
While the decline indicates a homogeneous spread, the losses of FAANG shares have been significant.
Facebook, Amazon, Apple, Google and Netflix (FAANG), which had a market value of $ 7.8 trillion at the beginning of the year, fell to $ 5.1 trillion with a loss of 2.6 trillion. .
Looking at the latest market developments, Blackrock warned that “don’t buy from the bottom,” while weak profitability prospects and rising interest rates have not yet made stock valuations affordable.
Thornburg Investment, on the other hand, said that as liquidity continues to dry up, the risks increase.
According to strategists at Morgan Stanley and Goldman Sachs, the shares still do not fully reflect the main risks stemming from corporate earnings and weak consumer demand, despite strong sales this year.
Consumer pessimism poses a vital risk to the US economy and stock market at a time when the Fed is trying to control rising prices with interest rate hikes, strategists said.