“Hay bad news everywherethe question is how the markets did not fall before”. It is a phrase that some operators affirm before and Dire Tuesday for stocks in the different stock markets, in which international indices plummeted to 4%. And the Merval of Buenos Aires was not alien to this, with a drop of 1.7%.
The coincidence of the analysts consulted by iProfesional is that a “Perfect storm”, where there is a sum of data and negative contexts for global activity. Among them are economic and political eventssuch as the imminent rise in interest rates by the United States Federal Reserve (Fed), high world inflation, the advance of Covid-19 in China, and the Russian invasion of Ukrainewith such an escalation of conflict that the threat of becoming a world war has already been added.
Added to this is a fact that is no less important: it is considered in the market that company valuations were at very high levels and now the “expected” setting of positions.
Therefore, the estimates of the experts is that, in the best of cases, due to all this combination of events, the world market can make a stock price adjustment that can range from 10% to 15%. Even more alarmist forecasts hold that if the economic recession begins to spread, it is expected that there may be corrections up to 30% in various quotes.
Analysts maintain that the shares have a margin of fall that can reach up to 30%.
Falling stocks and markets
In figures, this Tuesday there were notorious crashes in the markets global.
In this sense, in the United States, the Nasdaq plunged almost 4%, followed by falls of 2.8% in the S&P500 and 2.4% in the Dow Jones. In fact, some Actions referents of the planet came to plummet to 12%, as was the case with the papers of Tesla.
In the previous, the european markets had also shown wide falls, with the spanish ibex reflecting a down 1.6% and the German Dax falling 1.2%.
At the regional level, the Brazilian Bovespa fell by more than 2% and the Merval of Buenos Aires fell 1.7%. Precisely, in the main index of Buenos Aires, stood out the setbacks of the shares of YPF (-4%), Banco Macro (-3.8%) and Edenor, down 3.3 percent.
As for the Argentine actions that listed in New Yorkthere were also notorious falls, where the losses were led by YPF (-7.4%), Globant (-6,9%) y Macro deskwith a negative 6.3%.
Concerns about a new rate hike by the Fed, inflation and geopolitical conflicts hit stocks.
Prospects for further declines in share prices
The landscape for coming weeks sounds bleak, according to the expressions of the analysts. “Are so many reasons for this fall It strikes me that the market has endured so much without going down, with all the things that are happening”, he tells iProfesional Paula Bujia, Director of Fifth Investments.
From the numbers, he asserts that the global stock valuations ‘not cheap’ because their price earning is around 18 or 19 times, with the uncertainty of what the corporate earnings will be in the immediate future. “With the new Fed rates and high inflationa more logical price earning valuation for firms would be 16. Then, the S&P500 should fall to at least 4,000 points. So there is a little more room to go down, which may have a correction in its maximum prices of between 10% to 15%“, estimates Spark plug.
In his opinion, if a deep recession is entered, this situation brings falls in market prices “close to 30%”. Something that would be much more problematic for the market.
According to the vision of Paul Arriazueconomist and portfolio manager of Carbón Divest, “with these falls it is reflected that the prices were at a very high level for years and that there were no adjustments in between. There is a depletion in the share price, plus the mistrust that exists about Biden and a set of macro factors, which are going to mark a drop in values”.
For now, it is estimated that the early rise in Fed rates will hit tech companies squarelywhich are a very important part of the market.
The Fed may raise rates in the coming days to try to curb inflation, which weighs on activity.
Market crash: just a day to forget?
The look of the analysts consulted by iProfesional regarding the near future of the markets, generates more doubts and uncertaintiesin the midst of an extremely complex international context from the political and economic point of view.
According to Gustavo Neffa, economist and analyst at Research for Traders (RfT), “there is a feeling that the price floor has not yet been touched, given the Russian Nuclear War Threat, the imminent strong rate hike for the coming week from the Fed and, finally, the feeling of recession in the US for the coming months”.
According to market experts, there is a 97% consensus that the Fed will raise interest rates between 75 and 100 basis points, a high level for developed markets, pressured by high inflation in the United States.
“We are in a excessive volatility scenario, where the markets do not find more than falls and percentages in the red. The doubts that hover around a recession in the American market”, he details to iProfesional Gonzalo Gavina, PPI financial adviser. And he adds: “Usually, in this type of scenario, the investor seeks refuge in safer investmentsactivating the famous ´flight to quality´ (flight to quality), either stocks with value or sovereign/corporate bonds with a good credit rating”.
In summary, for Gaviña, at the moment it is “difficult to predict” a floorbut considers that it will be necessary to be very attentive to the next movements of the market. “To closely follow the american banking industry and the energetic“, recommends.
The Russian invasion of Ukraine puts economic activity in Europe on alert and puts pressure on inflation.
Fear of recession and global crisis
The truth is the global situation is volatile and with risks of recession advancing, in an environment of prices of the economy rising at a fast pacea warlike conflict in which its evolution is unknown, and a closure of borders in China due to the advance of Covid, with a consequent brake on activity.
“Hay Many worries. For starters, the Fed is going to be much more aggressive in raising rates, because the inflation is too high. So it may be that instead of a smooth landing for the economy, it now ends in a recession. That is one of the first concerns of the market”, summarizes Bujía.
Among the facts of international politics, the news also stands out that, perhaps, Russia cut off gas supply to Poland, and that adds tension to the war in Europe. Something that will affect the prospects of economic growth of the Old Continentsince the Monetary Fund reduced its projections in that sense.
“In addition to lower growth due to high inflation, the energy solution that replaces Russian sources will be more expensive,” Bujía warns.
And he ends: “To that must be added to Chinawhich has zero tolerance for Covid cases and has more than 20 million people in lockdown and isolated. That affects global growth and commodities. There is actually bad news everywhere, the question is how did everything not fall before?