01, Major Investment Banks, Major Sell-off
After the CPI in the United States finally dropped below 8%, the U.S. stock market experienced a carnival-like surge, with all three major indices recording their largest single-day gains in two years.
However, in the face of the market's optimistic sentiment, we observed that the major Wall Street investment bank, JPMorgan Chase, net sold $2.65 billion worth of stocks on that day. At the same time, it sold an additional $1.6 billion through short selling.
That is to say, on just this one day, JPMorgan Chase's combined sales reached $4.2 billion, which is the largest scale sell-off by JPMorgan Chase in nearly five years, indicating that the short-lived rebound in the stock market is still unlikely to change the bear market rhythm.
02, Lack of Follow-through
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Whether the U.S. stock market can transition from a bear market to a bull market is not crucially dependent on a day or two of increases, but rather on whether there is more capital and more investors willing to continue buying.
After the significant rise on Thursday, we pessimistically found that the U.S. stock market couldn't continue to rise on Friday.
The Dow Jones Industrial Average had the best gains in the previous days, but on Friday, although the Dow Jones Industrial Average fluctuated up and down, it only rose slightly in the end.
Although the Nasdaq Composite Index still increased by more than 1%, this is also related to the fact that the Nasdaq Composite Index had relatively fewer increases and more decreases in the previous period.
Moreover, JPMorgan Chase's data statistics show that from the beginning of this year to now, the average loss for retail investors has exceeded 40%, which is almost twice the 20% decline of the S&P 500 Index.Now, many retail investors have simply given up, so the current short-term rebound cannot make these retail investors willing to increase their investment.
03, There are problems with the foundation
Analysts point out that the current rise in the stock market is based on two foundations. First, inflation has fallen more than expected, and second, the Federal Reserve will reduce the magnitude of interest rate hikes.
But in fact, there are problems with both of these foundations.
Firstly, the decline in inflation is just a decrease in the monthly year-on-year CPI data. Last month it increased by 8.2% year-on-year, and this month it increased by 7.7% year-on-year, which seems to indicate that this month's CPI has dropped compared to last month.
But in reality, we see through the month-on-month data that this month is actually higher than last month. The decline in year-on-year data is just because the base in October last year was higher than the base in September last year.
So in fact, inflation has not really come down, and no matter what, the current year-on-year increase of 7.7% is still the highest level in 40 years.
Secondly, regarding the Federal Reserve reducing the magnitude of interest rate hikes, it does not help the stock market to improve, because it is just reducing the magnitude of interest rate hikes, but the Federal Reserve will still raise interest rates. It is expected to raise interest rates by 50 basis points in December, and there may be multiple 25 basis point interest rate hikes next year.
Now it seems that the interest rate hike cycle is longer than originally expected.
04, Recession is imminentIn the current investment market, there are still many investment giants who believe that the U.S. stock market is still in a bear market, and the U.S. economy is still in a recession. They persist in their bearish outlook for the future trend of the U.S. stock market.
There are many reasons that can be listed, but everyone must not forget an important signal among them—the inversion of the U.S. Treasury yield curve.
Data from the past has shown that such a long period of yield inversion, with such a large spread, has never allowed the United States to avoid a recession.
It is very likely that the short-term rebound during this period is just trapping more investors.