How Indices Climb and Companies’ Steady Growth will boost Social Economic Development
Oct 12, 2022
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Investor optimism has hit the markets once more after extended rallies in mid-August. The approaches taken by the US government and the Federal Reserve have worked to bring confidence to the once faltering markets. After one of the most extended periods of high inflation, the rebound will help companies close the year on a high note and free more money for achieving social-economic goals.
Share value is on the upward trend once more following the extended runs of base point hikes by central banks. However, amid optimism in the AUS200 Index and S&P, some issues in the market are still hard to ignore. Top of the list is the Chinese government's latest move to slash growth figures for the year; China’s zero COVID policy, and the war in Eastern Europe that is creating a lot of destruction in the energy sector.
How Are Shares Faring
U.S. stocks have received an important boost by the efforts taken by the Fed reserve and government. The investment attitude towards new stocks is also high in Australia after a long time. Apple, Microsoft, and Tesla have all registered a positive uptick in the movement of their shares in August, contrary to the previous suggestion that the year will be bad for big tech. Stocks moving up means that top indices have also picked some points.
Vigorous attempts to invest in big tech means that the S&P 500 is flourishing, easing the pressure on treasury bonds that acted as a buffer for faltering stocks for a while. Beyond tech stocks, consumer stocks and utility companies also witnessed a rebound thanks to the peaking of inflation in mid-July.
The widely expected peak somewhere between the months of June and July pushed the markets some points higher. The heightened activities driving the rebound are down to the possibility of lower lending rates soon.
However, while the rebounds are positive so far, they are yet to reach the December highs.
Fears of a Recession
The reverse of a rise in interest rate policy will not come anytime soon in Australia or anywhere in the world, even though the markets have shown signs of recovery. The aggressive moves to increase the base points have so far begun slowing down growth and will probably lead to an increase in unemployment going into 2023. The Dow has responded positively to the spike in interest rates in August with a rise of about 150 points, which represents about 0.4 percent. The S&P has increased by about 16 points, while the Nasdaq has risen by about 80 points.
The positivity across the market is not down to the action by the Fed reserve to help curb the rising cost of living, but in the anticipation that inflation has reached a peak point and will begin to fall. However, the aggressive policies taken by the Fed reserve are leading to fears of a recession. Recent economic data has pointed out that the U.S. economy has contracted in two consecutive quarters, and a recession might be on the horizon.
Impact of High-Interest Rates
Higher rates are good for government-backed treasuries. However, they dampen the leading tech stocks that have outperformed other sectors in the last decade. Data from the S&P shows that the value index outperformed the growth index. The energy sector has also taken a hit, meaning its S & P index has not been in the positive territory as other sectors.
Higher rates dampen borrowing and put a strain on people who want to take new mortgages. Extended periods of higher rates slow growth and influence the efforts that go into the social and economic front.
However, while the rates stay high, and inflation has reached its peak, many companies have witnessed positivity in their incomes. Walmart's stock was up in August by about 0.6 percent before its expected second quarterly results. Companies listed in the S&P will have better results in the second quarter than earlier predicted when the markets were in a slump.
Top Indices are Recovering
After a lengthy slump, top indices have shown signs of recovery. The climb registered now does not come close to the December highs of 2021 but tells a story of a better third quarter and more money to help deal with social and economic issues.