Stock Market Forecast for the Week Ahead: Neutral
- The Dow Jones[1], Nasdaq[2] 100 and S&P 500[3] will look to recover from last week’s turbulence
- Inflationary fears have pressured risk appetite across asset classes and traders will look to the upcoming Fed minutes for further insight
- Stock Market Seasonality: Should you sell in May and Go Away?[4]
Stock Market Forecast for the Week Ahead
The Dow Jones, Nasdaq 100 and S&P 500 endured considerable volatility last week as the three indices declined roughly -1.1%, -2.3% and -1.4% respectively. White-hot inflation data was largely to blame for the initial wave of selling as investors reassessed the Fed’s policy path given new economic readings. As the week progressed, disappointing retail sales and consumer confidence data helped to soothe hawkish fears and the indices were able to close the week off the lows.
That being said, the fundamental forces that were driving price action last week will likely persist into the weeks ahead as market participants attempt to gauge precisely when the Fed will look to shift its policy path. Fed Chairman Jerome Powell has repeatedly stated any change would be communicated well in advance which has led investors to suspect recent hawkish remarks from some Fed officials could be the start of that communication. Crucially, there has been no official statement and the commentary was only slightly hawkish.
Nasdaq 100 to Dow Jones Ratio – Growth to Value Rotation Visualized
Nevertheless, the concern has put investors on edge and sectors of the market that are particularly exposed to more hawkish policy – namely those with lofty valuation metrics – were firmly on the backfoot last week as a result. The phenomenon is just another leg of the ongoing reflation
