All the three leading US stock market indices ended in red in May 2022. S&P 500, Nasdaq 100 and Dow 30 ended the month of May 2022 posting a negative return of 0.56 per cent, 3.32 per cent and 0.22 per cent respectively. Since the start of 2022, the broad market is falling and S&P 500 was within touching distance of a bear market in May. Will the stock market slide subside, will there be a bear market rally going ahead, remains to be seen.
It has been one of the worst starts for the year with Nasdaq 100 down by almost 23 per cent and S&P 500 down by nearly 13.3 per cent. According to Dow Jones Market Data, the S&P 500 and the Dow Jones Industrial Average are on track for the worst first 100 trading days since 1970.
With rising food prices and energy cost, what impact will be there on the US economy remains to be seen. The recessionary fears may keep the volatility at its high in the stock market. Series of rate hikes as put forth by the US Fed will be keenly watched by investors. Any unexpected inflation numbers may spoil the sentiments and could send stocks further down.
Starting June 1, the Federal Reserve’s balance sheet is also going to be reduced. How the stock market reacts to the Fed’s quantitative tightening, which officially starts Wednesday, is something that will at least determine the short-to-medium term path for the stocks.The Federal Reserve is set to start shrinking its $8.9 trillion balance sheet from Wednesday.
President Joe Biden met the Federal Reserve Chair Jerome Powell and acknowledged that he’s respecting the central bank’s independence. However, Biden said that the responsibility for controlling the decades-high inflation ahead of the November midterms rests with the US Fed. The meeting came ahead of US payroll numbers this Friday.