September has passed and Wall Street is debating almost one topic, even if it seems monotonous: What will the Fed’s behavior be regarding interest rates.
Surveys show that 30 percent of financial actors and economic experts believe that between now and the end of the year there will be another quarter point increase. It is widely considered that, even if the reference interest remains at 5.50% per annum, in the first half of 2024 it will remain stuck at that point.
As the reader will remember, Jerome Powell himself warned that, according to his predictions, throughout the next year there may be at least a half point reduction in the cost of money. The inflationary dragon has not been defeated.
We have had stagnation in the stock market for two years and it looks like it will continue throughout 2023in the heat of fly in quality towards the safest asset on the planet: the United States Treasury bond. The ten-year security closed Friday at 4.581% annually.
September was the worst month of the year for the S&P 500 index and the tech Nasdaq, which fell 4.9% and 5.8%, respectively.. The Dow Jones fell 3.5% to 33,507 points, which could be a ceiling between now and January.
So there are dangers in bearish corrections on Wall Street. But it will depend, in any case, on the next numbers. This Friday we learned that the underlying personal consumption expenditure index (PCE), one of the Fed’s preferred indicators for measuring inflation, slowed to 0.1% in August in monthly terms (3.9% year-on- year), the lowest number since November 2020. In a few days, we will have unemployment data, another key number.
Regarding Argentina, I would like to emphasize that we have an annual inflation of 120 percent and rising. Among other things, this is due to bad political practices; Ours is a country where we cannot even prevent a sitting Minister of Economy from becoming a presidential candidate. Their incentives to act with demagoguery are very strong.
We will see it with him Recharged Platita Plan which can do nothing but fan the flames of inflation. Sergio Massa’s capacity for damage is huge and it worries the local market a lot, hence the urgent dollarization of portfolios.
I’ve read polls that show many think the official dollar will be around 600/650 pesos by the end of the year. If the current gap continues, we will see the blue and the financial dollars in a range between $1,200 and $1,400. The inflationary spiral will be enormous. Not only that, the Merval index measured against liquid cash, which closed at 700 on Friday, could collapse to 500. The country’s risk could increase to 3,200 points with bonds returning to parities of 25%.
This comment has nothing to do with personal political preferences but with a cold analysis of the adventures of a person responsible for managing the economy who signs any check to reach the runoff.