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Another bear-market rally comes and goes

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Risk appetite wanes once more

We’re back in risk aversion mode at the start of the week with equities sliding, tech getting crushed and the dollar reigning supreme.

While the jobs report on Friday highlighted that the US is faring better than the rest in the race to avoid a recession, the rest of the world is sinking under the weight of a cost-of-living crisis and higher interest rates.

Another bear-market rally has come and gone and we now head into earnings season and another week of major economic reports fearful of what may lie ahead. The US inflation data midweek is a standout, as investors cross their fingers for signs of decelerating prices.

Central banks aren’t ready to take their foot off the brake yet though, with the Fed pondering 50 or 75 basis points when it meets in a couple of weeks.

In the interim, the BoC and RBNZ look set to continue with 50 basis points as both try to get to grips with price pressures before the economic bill arrives.

Which brings us to earnings and what warnings corporate America will have to offer in the coming weeks. As I’ve already mentioned, the economy is widely expected to show greater resilience than most others over the next year or two thanks to a strong labour market but cracks have appeared and investors may be sensitive to signs that firms are not so optimistic after all.

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Craig Erlam

Craig Erlam

Former Senior Market Analyst, UK & EMEA at OANDA
Based in London, Craig Erlam joined OANDA in 2015 as a market analyst. With many years of experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while producing macroeconomic commentary.

His views have been published in the Financial Times, Reuters, The Telegraph and the International Business Times, and he also appears as a regular guest commentator on the BBC, Bloomberg TV, FOX Business and SKY News.

Craig holds a full membership to the Society of Technical Analysts and is recognised as a Certified Financial Technician by the International Federation of Technical Analysts.
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