Investors and consumers share a pessimistic market outlook due to the U.S. Federal Reserve’s tightening policy.
For the first time since October, the midterm outlook has jumped amid fears of higher increases in consumer products. Recently, FED officials said that food and energy prices in the U.S. will be 2.5% lower by the end of 2024, at most.
However, consumer trust indicators show the opposite: U.S. consumers feel more pessimistic about the market’s future outlook.
Several reports confirm that credit access is much more difficult these days, affecting the average American’s buying abilities.
Respondents to the official Federal Reserve survey show that they expect about a 50% increase in food and energy prices by the end of this year. The survey also added that credit has jumped to 58.2%, its highest level since 2013.
Despite the respondent’s worries, the FED’s monetary policymakers showed their commitment to their target rate of 2.5%. That means more and consists of higher interest rates.
The survey also added that consumers will see a 4.6% and 5.6% increase in gas and food prices by the next two quarters.
As of now, inflation has cooled down to 6.6% since last year at this time; however, the pessimistic outlook is reasonable to some degree. Marketers believe that by raising key interest rates continuously, they might help cool down inflation, but in the case of economic downturns and unexpected events, this will turn southpaw.
Undoubtedly, the consumer’s trust in the authorities and their decisions is diminishing. The survey also shows other pessimistic data. This time, it’s about the stock market’s price growth. More than 65% believe that most stock prices will remain at their current level, while 35% see a rising price potential.
Moving to Wall Street and individual stocks, tech stocks led to today’s losses due to rising interest rates and a series of continuous rate hikes. The inventors share the same pessimistic outlook about the FED policy. Apple, Tesla, Alphabet Inc., and Amazon were all among the top failures.
As of 13:45 a.m. ET
The Nasdaq composite was down by 0.3%, the S&P 500 benchmark fell by 0.24%, and the Dow futures saved the day by rising by 0.15%.
Investors were hoping the higher interest rate cycle would end by March, but the strong employer data only encouraged the FED to maintain its current pace. In May, the Fed will raise its key interest rates by 25%.
This will either mean the cycle will end or there will be a few more weeks of higher key interest rates.
According to Sam Stovall, a chief investment strategist at CFRA Research in New York, there is a good chance that May will be the end of the tightening cycle. His words agree with most investors’ forecasts, especially when the tension in the credit market and banking sector has reached a critical level.
Meanwhile, oil market prices are declining amid fears of future shortages in oil and gas supply.
The West Texas Intermediate fell by 0.72% to $80 per barrel, and Brent oil fell to $84.5 per barrel.