Earnings May Support Market Amid Inflation

Since the beginning of October, we have warned that this month could be the most volatile month of the year. But this year could be even more special than any other year because of inflation. The stock market rallies triggered by the Covid 19 relief measures are still active, so the stock markets could be particularly volatile. To be sure, September was reportedly the sharpest downturn since March 2020. But in October, the markets managed to recover for two weeks in a row.

The release of third-quarter results produced positive results for most companies so that investors ignore inflationary pressures and supply chain bottlenecks.

This may sound like a comforting thought, but it has been part of the truth from the beginning of the outbreak until today. Investors on Wall Street try to pretend that they are blind, that they only care about profits, even if this has a negative impact on the economy in the long term.

While investors are concerned about inflation dimming the picture of economic recovery, I’d like to ask an important question: “Why can’t stock markets that were once related to the economy, like the Nasdaq, run the way they used to?”

Or is this just another wave of volatility? Because no matter where the market swings, investors don’t care about short-term uptrends or the downtrend. Their focus is on earnings reports from well-known companies such as Netflix (NASDAQ:NFLX), Tesla (NASDAQ:TSLA), Intel (NASDAQ:INTC), Procter & Gamble (NYSE: PG), and American Express (NYSE:AXP).

This week, the yield on the 10-year U.S. Treasury note fell for the first time in eight weeks.

The US dollar weakened, causing the world’s reserve currency to fluctuate for the third week in a row.

Even though the U.S. dollar is depreciating and bond yields are falling, gold still cannot take advantage of this opportunity to form a clear bullish trend.

The longer the price of gold fails to rise above $1800, the more it suggests that the price could continue to fall. Or is it that gold has already ceded the status of the world’s most important safe haven asset to cryptocurrencies like Bitcoin? Because in the same period, Bitcoin managed to gain for the third week in a row.

Bitcoin has already hit two new all-time highs this year: $64,000 in April and $67,000 in October.

Finally, the price of crude oil, which is part of the current inflation, was able to rise above $82 per barrel for the first time since 2014. This allows WTI crude oil to make a successful upward move and is the longest WTI crude oil bull run since 2015.

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