This week has seen its fair share of ups and downs in the markets. With the weekly opening reaching positive highs only later to take a tumble downward as the week comes to a close.
Many on Wall Street and across the globe feel that this recent market decline could be linked to investor concerns about inflation rates and the continued spread of a new virus variant that has made itself known within the U.S. borders recently.
With these concerns still lingering and markets presently in the red, today we take a look at these concerns and why many trading professionals have yet to get comfortable in this new post-pandemic world.
Traders Fear Inflation
This past Thursday, FED Chair Jerome Powell commented on the U.S. central bank’s recent decision to keep the low-key policy measures in place that they implemented last year during the pandemic crisis. This decision comes even as inflation surges to the highest level in 13 years.
Discussing the topic with members of the Senate Banking Committee, Powell faced some backlash from some of his Republican colleagues who claim that the recent burst in consumer prices is fleeting.
Responding to Republican concerns, Powell commented that he felt there was a “shock going through the system associated with reopening of the economy, and it has driven inflation well above 2%,” referring to the recent price as “unique” and restating his previous comments that the central bank is closely monitoring the situation to see whether the inflation dissipates or will prove to be long-lasting.
On Tuesday, the U.S. government reported that our nation’s inflation rate has recently risen at the fastest influx since 2008 (when reviewing June data). These reports show consumer prices jumping 0.9% from May and 5.4% over the past year, overall.
On Wall Street, the markets have been keeping a close eye on Jerome Powell for any sign that the central bank is ready to start scaling back their massive monthly bond purchases but Powell continues to stress that the economy is still “a ways off” from where it needs to be in order for policymakers to begin paring the Fed’s purchases of $120 billion a month in bonds.
When questioned about a potential upcoming change in policy, Powell told reporters Thursday that officials had merely started “talking about talking about” tapering even though minutes from the June meeting showed that officials discussed how and when to begin taking action.
With no officially reported end in sight, many on Wall Street feel that more concrete information will be released when central bankers meet in August at their upcoming annual retreat.
New Virus Data Sparks Concerns on Wall Street
As if we didn’t have enough to worry about, recent statements made by Dr. Rochelle Walensky (the director of the Centers for Disease Control and Prevention) have let it be known that, in regard to recent covid outbreaks, “after weeks of declines, seven-day average daily deaths have increased by 26% to 211 per day.”
Presently, the seven-day average of new cases being reported reached 26,300 which is an increase of 70% from last week’s data, as reported by the CDC.
Reflecting on these most recent numbers, Dr. Walensky said the pandemic has now become a “pandemic of the unvaccinated,” stressing that, while those vaccinated individuals have a better immunity towards any virus varient, she and other officials are seeing, “outbreaks of cases in parts of the country that have low vaccination coverage because unvaccinated people are at risk and communities that are fully vaccinated are generally faring well.”
With this new “delta variant” making its way into the United States, many on Wall Street fear that signs of further spreading of the virus in any shape or form will stall any economic growth progress that we’ve made over the course of the past few months.
As such, many investors are holding off on any big movements in the markets until further data shows a diminished spread of sickness across the globe that could impact their accounts.
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