US stock indices have been under pressure this week, falling to their lowest levels seen in some five weeks. There isn’t one particular catalyst for this, rather a few points to note in our view for the moves lower.
Deflation: There are growing signs of deflation in the U.S. economy, a decline in the general price level, which is harmful during a recession as consumers and businesses may then start delaying purchases in anticipation of lower prices, worsening the economic downturn. If consumers and businesses are not spending, then, of course, this is a huge negative for stocks.
US-China: Tensions are picking up at a blistering pace between the two largest economies in the world, U.S. and China. In the session on Thursday, President Donald Trump renewed worries over Sino-U.S. trade relations. The President said he was very disappointed with China over its failure to contain the novel coronavirus, saying the worldwide pandemic cast a pall over his U.S.-China trade deal.
FOMC rule out negative rates: Various FOMC members including the Fed Chair Jerome Powell, have categorically ruled out the option of negative interest rates.
All of the above-detailed factors have weighed on investor sentiment, which is likely to reinforce the theme of selling the rallies for quite some time.
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