The market mood seems to have turned on a sixpence.
Investors had initially taken Fed chair Jay Powell’s guidance that a 0.75 percentage point increase in rates was unlikely as a reason to be positive.
However, Wall Street seemed to change its mind overnight having had time to chew it over, and there was notably heavy selling, particularly in the technology-biased Nasdaq index.
Concern about inflation is the culprit, as ever, and the wild swings we’ve seen this week are a reminder that sentiment is about as fragile as a porcelain doll.
“The other fear is that the cure for inflation, higher rates, could be as bad as the disease if they choke off growth and even lead to recession,” says AJ Bell investment director Russ Mould. Market mood changes amid heavily selling in US
“Not helping matters across the Atlantic was a series of very downbeat updates from e-commerce firms like Shopify, Etsy and eBay. Clearly online shopping got a very significant boost during the pandemic for obvious reasons and, while it’s not like all those gains have disappeared, it does appear expectations got ahead of themselves.
“WPP founder Martin Sorrell was in full on mea culpa mode for the markets as he apologised profusely for the delay to results from his new venture S4 Capital after they were finally unveiled. These were a mixed affair although investors seemed to have responded with relief that there were no big hidden nasties in there.
“Sorrell has also pledged to tighten up the company’s controls and structures in a bid to win back some credibility.
“Despite a 10th consecutive month of growth for house prices the mood music around this number is definitely subdued with growth at least starting to slow and warnings that rising rates and inflation will soon dent demand. The property market may finally be about to be reacquainted with gravity.”