July 20, 2021

Global stock indices ended Monday with a fall

 US stock markets closed lower on Monday. The Dow Jones Industrial Average lost 616 points at the close, and amounted to 33926 points. The Standard & Poor's 500 index lost 58 points, showing a decline to 4255 points. The Nasdaq Composite index fell by 137 points to 14534 points at the close. The stock indexes of the United States, the European Union and Japan also closed with a decrease, which lost from 1% to 3%. Experts are sure that the US stock market can start a rather noticeable decline, which from a technical point of view will be a correction against a long upward trend.

It can be recalled that during the pandemic, the US stock market showed quite strong growth. This effect was achieved against the background of the injection of huge amounts of money into the American economy as stimulus programs of the Federal Reserve and the US government. However, stock markets still cannot grow forever, so a correction is very likely. In addition, investors are afraid of a new wave of the pandemic around the world. So far, the greatest concern is caused by the United Kingdom and the EU countries, where there is a fairly high increase in the number of cases of the "coronavirus".

Mike Wilson, chief strategist at Morgan Stanley, believes that stock indices may sink by another 10-20%, as recently there has been a decrease in the rate of income growth and the pace of economic recovery. Other experts believe that in the near future (or already) the peak of the economic recovery in the US will be passed, inflation will begin to slow down, and the US dollar may start falling again. Experts note that since the Fed's QE program continues to work, the money supply continues to grow in the US, but the stock market may still fall in the near future. Forecasts for the further development of events are now "moderately negative". The main question will take place in another. If the money supply continues to grow, and there will be an outflow of investments from the US stock market, then where will all the withdrawn money flow to? As we have already found out, bitcoin is not in demand now, like many other cryptocurrencies, so there is also an outflow of capital from the cryptocurrency market. Consequently, two large markets are now giving away capital, and not attracting it. Jerome Powell did not give investors a reason last week to believe that the Fed will end the QE program in the near future, but said that he expects inflation to slow down. However, at the moment, inflation in the United States is already 5.4%. Thus, most of the shares are now unprofitable, since the dividends on them are much lower than the inflation rate in the United States. For example, most technology companies like Tesla, Apple and Microsoft pay up to 1% of dividends. Thus, the outflow of investments from the stock market may also be associated with strong inflation in the United States.