Friday's Market Minute: Growth Fears Are Overtaking Inflation Fears

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The tech trade began to crumble late last year when it became clear that inflation wasn’t easing. During the equity rout, energy stocks and a group of ironclad consumer staples companies were holding up well. Last week, mega-cap tech giants Microsoft and Apple traded poorly.

This week, consumer defensive companies such as Walmart, Clorox, and Procter & Gamble have now lost serious ground. Walmart is down nearly 20% in the last three days after issuing weak profit guidance, and Wednesday’s carnage has done a lot of damage to investor psychology.
If equities continue to trade lower today, it will mark the 7th losing week in a row. Until investors see a change in the Fed’s actions and tone, they are allocating as if equities are in the worst-case environment with further downside risk.

If the markets continue to decline, vulnerability could creep into the credit markets as credit conditions worsen, causing cuts to earnings forecasts, leading to a negative feedback loop. As inflation continues to take longer to cool, the Fed could decide they need to lift rates higher than currently expected. This development alone could likely further punish the market and potentially tip the economy into a recession.

Image sourced from Pixabay

This post contains sponsored advertising content. This content is for informational purposes only and not intended to be investing advice.