Wall Street traders watch numbers fluctuate (getty)
The war crises in Ukraine, high inflation and the possibility of US interest rates rising to 3.3% by the end of this year are besieging investors in the financial markets. While the US interest threatens the “Wall Street” financial market with a recession, it also increases the risks of bankruptcy of some weak economies in Asia, Africa and Latin America.
These factors combine and place investors in real distress during the current year, and consequently confuse the investment path in the world. The Russian war in Ukraine has raised the prices of basic commodities in the US and European markets and increased inflation at rates that forced the Federal Reserve, the US Federal Reserve, to raise interest rates by 0.75% last Wednesday.
Economists expect in a survey conducted by the Wall Street Journal that the Federal Reserve will raise the interest rate on the dollar to 3.3% by the end of this year.
According to analysts, investors are faced with difficult and limited choices over investment channels that can bring in profits for them or even insure their money against losses.
As for U.S. equities, on which foreign investors have relied for returns in dollars, investment analyst at the “Axonic Capital” fund, Peter Schenni, expects in comments to “Business Insider” that investors in the U.S. market will suffer significantly. losses this year.
Sechini points out that raising the US interest rate in the presence of inflation could cause economic problems for families in the United States, as it increases the cost of borrowing at a time when the price of basic commodities such as fuel and food continues.
Sechini does not rule out that the U.S. stock market will be subject to a serious correction that affects stock prices, emphasizing that the possibility of losing 50% of its value has become possible. This rate, if reached, will mean a real blow to investors in the US stock market. Experts have noted that US companies have not yet lowered their revenue forecasts for this year, despite the risks surrounding the US economy.
In the same vein, Mike Wilson, an investment expert at the US investment bank “Morgan Stanley”, says in comments reported by “CNBC” that he does not believe that raising interest rates at this large rate will solve the inflation problem.
Wilson points out that raising interest rates increases the risks of economic stagnation, as tighter monetary policy automatically leads to a slowdown in the economic cycle. Usually, the rise in the price of debt in consumer societies leads to a decrease in the cycle of consumer purchases and this increases families’ fears about the future of debt repayment, especially the owners of property loans.
The Fed’s mistake, Wilson said, was to “raise rates at higher rates than expected”.
In the same vein, a survey conducted by the Wall Street Journal, in which a number of analysts and economists participated, expected the US economy to experience a recession during the current year or in the first half of next year. enter. And 44% of economists surveyed said the economy would enter a recession within the next 12 months.
At the level of the European market, which is considered the second most important market in the capitalist bloc, investors were surprised by the loss of French President Emmanuel Macron’s majority in the French parliamentary elections. This loss deepens the government bond crisis in Europe.
According to data published by the American Nasdaq website, the 10-year French treasury bonds were the first victims of Macron’s loss, as the yield on them increased, and thus the difference between them and the yield on German bonds increased. . According to data published by the US website, the yield on French bonds rose to 2.21%.
Investors are worried about the consequences of the loss on the limitation of its ability to implement economic reform policy in France, as well as its impact on its ability to shape the course of politics in Europe, and thus exacerbate the results of the French elections the deep crisis. in the European bond market. Yields on Italian bonds rose to 4.0% last week.
Investors in Europe face a set of challenges, the biggest of which is the Russian war in Ukraine, which threatens the future of stability in Eastern Europe, and increases the risks of investing in European debt securities.
Since the start of the war in Ukraine, the two largest banks in Italy have lost about 37% of the value of their shares. Investors are currently fleeing Italian bond purchases, which have boosted ECB purchases.
On the front lines of emerging markets, a report by the US investment bank “JP Morgan” indicates the great flight of several markets due to the weakening of the exchange rate of emerging currencies against the dollar, the failure to pay debt payments and the depletion of hard currencies from the reserves of central banks in more than 15 countries.
At the dollar liquidity level, emerging economies have so far faced a continuous capital flight from their markets to the US market. In this regard, data from the Institute of International Finance in Washington says that the amount of “net money” that fled emerging markets last March was $ 9.8 billion. According to the institute’s data on its website, the pace of capital flight continued in the second quarter of this year.