If there were times when the earnings season was decisive to indicate the direction to be followed by the markets, the next few days will be included in that list, with all the heavyweights of technology and the market in general, disclosing their behaviour in the last three months, but more importantly to reveal how they are forecasting the rest of the year, given the obstacles that are posed, namely high inflation, the meteoric rise in interest rates and the war in Ukraine, all factors that many analysts point out will force the world’s largest economy and most likely the global economy into a recession, even if it is short-lived, or at the very least into negligible growth.
And if until a few months ago the bulls were clearly in control of events, the historic turn of the FED in the normalization of its monetary policy, which includes a quick neutralization of the purchase program and which already includes the reduction of the gigantic balance sheet, the bulls have now, finally and after many years of drought, space to impose its strength, which in practice means replacing the careless risk aversion that led investors to invest in assets with clearly unsustainable valuation ratios in relation to market metrics , in other words, shares now have to compete with a very important means of investment that was barred, that of fixed investment, which after many months of very low returns, or even negative interest rates, is now returning in force with the rise in interest rates.
Whatever the direction, it is almost certain that by the end of next week there will be a definite direction, whether to test new highs, or new lows for the year, after a sideways consolidation started in February.
