Panic Attack, Correction Talks and Goldman Predictions

20 Agu 2021

There were no global events in terms of news yesterday. Jobless claims, as usual for recent weeks, continued to show a downward trend and renewed pandemic lows. The numbers that were before the pandemic have not yet been achieved, but they are not so far away.

Nevertheless, financial markets were hit by a slight panic attack yesterday. The minutes of the last FOMC meeting made it very clear that the tightening of US monetary policy is only a matter of time. This means that risky assets are at risk. The VIX jumped higher, with stock and commodity markets crashing down. At some point, it began to seem like it had begun. But it was possible to stop the panic attack, including with the help of the army of optimists that formed in the financial markets in the last little over a year. So far, the idea of ​​“buying deep” remains working.

But this is for the time being. Let's assume that yesterday there was a warm-up or a rehearsal, or a reconnaissance. Corrections are already in full swing in the markets. Over the past 20 years, there has not been a single case when the index grew plus or minus by 100% without a subsequent deep correction. Moreover, there are plenty of reasons to start it. It is likely that yesterday the markets decided to wait for news from Jackson Hole, and then panic fully.

Speaking of fundamental reasons for selling. It is clear that the main fear of the markets, or even not fear, but a nightmare, is a change in the vector of monetary policy in the United States and in the world as a whole. Next, we have a pandemic with its consequences. After that, the slowdown in the pace of economic recovery and the rest of Afghanistan.

This week, in connection with all this, Goldman analysts could not stand the nerves, who radically revised their forecast for the growth rate of US GDP in the third quarter from 9% to 5.5%. And most importantly, they are not alone in their pessimism. Bank of America also lowered its forecasts for US GDP growth in the third quarter to 4.5%.

In terms of news, today is interesting primarily with data on retail sales in the UK and Canada. Weak data will be another reminder that not only the economies of China or the United States are slowing down, but this is a global problem.