Perry Simo Dominic, Renta 4 Office Manager
After the panic in global stock markets on August 5, affected by the panic of the possibility of Japanese debt default, with the subsequent resignation of the government, which was linked to high unemployment rates in the United States. It seems that the decline in GDP growth was the catalyst that caused this correction, which was supposed to be large, in overvalued companies, especially technology companies, with the flow of the Japanese yen.
The truth is that on the same day, the decline was very deep, especially for the dates we were on, because in August the volume of the markets decreases, and it is much easier for panic to lead to this situation.
Despite everything, in the following days, there was a moderate but sustained rise on the part of investors in the markets, because despite fears of a decline in growth, which meant, above all, lower expectations for sales and corporate profits, this did not seem to be the case.
So, in the following weeks, the release of results from large companies, which continue to generate huge returns, stopped this wave of disappointment. The release of better-than-expected US consumption, and that there is still a huge amount of money to invest, also helped in the fact that investors remained on the optimistic side, and buying continued.
In our opinion, these are the first signs of change, in a slow correction, which is part of what many experts call a soft landing, but what raises the question is whether there will be an expected rebound again later.
The Fed’s stance on a potential rate cut in the US would also mark a turning point, as growth has so far been expected to hold until the end of the year, and with inflation under control, a rate cut could be interpreted as another boost to that. Economic growth is not slowing down and the boom phase of the current economic cycle is prolonging.
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