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Last week the word was that U.S. equity markets softened as investors face a growing likelihood that the COVID virus’s Delta variant will slow economic growth and possibly end the markets’ current record-setting bull run. That’s what we had forecast and the Financial Times reported.
Figures showing U.S. retail sales slowing, a slowdown in China’s expansion as the Delta variant heated up and they closed major shipping ports, and surveys showing U.S. consumers’ increasing doubts about the economy’s prospects had spread market worry.
Because of those factors, “coupled with signals that Federal Reserve policymakers are readying to pare back emergency stimulus measures in the months ahead, money managers voiced doubt about stocks’ ability to rise beyond already lofty levels,” the FT said.
Last week, some market players exited stocks and put money into derivatives protecting assets from a sinking stock market; other investors cashed out of equities and stored cash in money market accounts, with assets in those vehicles growing in volume for the second consecutive week, data from the Investment Company Institute showed.
Also, yields on treasury bonds have slipped toward yearly lows as more investors have taken shelter in their safety, the FT noted.
“The market is at all-time highs,” portfolio manager James Tierney at AllianceBernstein told the FT.
“Look at where we’ve come in a year; look at the elevated price-to-earnings ratio,” he said.
“You put a lot of that together and people are just nervous and their inclination is, ‘Let me take a little money off the table’.”
The U.S. economy will expand by 5.5 percent in this year’s third quarter, according to Goldman Sachs analysts, not the 9 percent they previously forecast, with the resurgent COVID virus responsible for the bank’s shrunken outlook.
The bank also trimmed its full-year forecast from 6.5 percent to 6.
“The impact of the Delta variant on growth and inflation is proving larger than we expected,” the analysts wrote.
“Spending on dining, travel, and some other services is likely to decline in August, though we expect the drop to be modest and brief,” they noted.
TREND FORECAST: But again, that was last week. Now that the FDA “officially” approved the Operation Warp Speed gene therapy vax, that’s old news and the markets are on the rise. Which we forecast will be temporary.
Among the main challenges to the U.S. and global economic recovery will remain a shortage of materials, choked supply chains, a scarcity of needed skills in the workplace, inflation… and the growing mandates being imposed by governments to be vaccinated in order to be “free,” the Delta fear that will have people going out less, and the growing resistance to continue fighting the COVID War among a sizable sector that will dampen economic growth.