Stock Markets Are Doing Whatever They Want, and This Is the New Normal

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While headwinds seem to be on the horizon for the stock markets, how can we explain this situation?? Last week we told you about the latest Bitcoin crash. A shame when the cryptocurrency now has guarantees of respectability – since large hedge funds now have the right to market indices indexed to this crypto.

With all the stringent conditions that go with it; including the obligation for these issuing bodies to acquire an appropriate quantity of this asset. But it was enough to raise fears about the state of the American market, raised by the fear of a rise in unemployment in the middle of summer. Enough information to betray a slowdown in the economy according to some analysts.

Stock markets reassured by signals from the United States

Which immediately plunged the stock market, but also cryptocurrencies, more exposed than ever to its fluctuations, into the red. Let's move forward a few days to Tuesday, August 20, a few hours after the opening of Wall Street. These concerns, closely linked to a seasonal indicator (employment tends to contract each year during the summer) no longer seem, for the moment, to act as a red rag.

Certainly, from the NASDAQ to the CAC40, via the DAX, the FTSE and the JPX… almost all financial markets were in the red at the time of writing. Less than a decline, everything seems to indicate a session that will end on a rather positive note, overall. It must be said that the latest inflation figures in the United States have been released. And they are rather reassuring.

Inflation is approaching the rate of 2% hoped for by the FED, compared to up to 3% a few months ago. The economy remains robust, and the idea of ​​a reduction in key rates is starting to take hold. A rather ideal situation, a priori, for investors; on this market so intimately intertwined with the global economy. However, it is much too early to pop the champagne.

Firstly because this situation remains fragile, awaiting clear signals from the FED and the market as a whole. Furthermore, as noted by journalist Larry Eliott at our colleagues at The Guardian, the robustness of the economy in the United States, Europe and Japan is no longer sufficient to reliably bet on the opening of a period of sustained growth.

The Chinese economy and the war in the Middle East remain underestimated

The Chinese economy and major military conflicts will play a leading role in the coming weeks. On the Chinese side, in particular, the situation is rather worrying. And the questions are rather structural. As our colleagues explain:

“China produces twice as many solar panels as the rest of the world can use, while nearly a third of car manufacturers are not profitable”, explains The Guardian.

A consequence of a development model focused on surplus and low-cost exports, but which risks running into a reversal of consumption abroad at any time.

On the military intervention side, we still remember the effects of the outbreak of war in Ukraine on the markets and the cryptocurrency sector. The risk of a military escalation in the Middle East – in the midst of Israel's military intervention in the Gaza Strip – is real.

With the threat of war breaking out also involving Iran and potentially the United States. But also that of a new oil shock that could still make the stock markets as unpredictable as they are volatile in the coming months.

• While the global stock markets are rather reassuring observers this Tuesday, the situation remains rather wait-and-see.
• A shame since the situation on the American market for a massive rebound in the economy rarely seems to have been on the verge of becoming so ideal.
• The global economy is however marked by an overheated Chinese market, and the diplomatic deterioration in the Middle East, against a backdrop of military conflict.

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