- An inverted yield curve highlights the upcoming United States economic recession.
- October saw inflation rising less than anticipated catalyzing a swift rally within the United States stock market.
- A declining wedge formation indicates more potential upsides until the upcoming FOMC conference.
The United States stock market saw rallies since the previous inflation data indicated that inflation could have cooled. Prices of services and goods in the US rose less than anticipated in October, catalyzing rallies in the stock marketplace and declines in the United States dollar.
Considering everything that 2022 saw, including supply chain hurdles, Fed’s tightening, and the Russia-Ukraine war, the question is whether the latest bounce was false or there’s a bottom for 2022.
Yield Curve Hints at Upcoming Recession
The Treasury yield remains a crucial indicator. It compares short-term interest rates to long-term interest rates. Meanwhile, short-term exceeding longer-term ones indicate an imminent recession. 2022 saw the yield curve inverting to the lowest mark in twenty years.
Companies might have challenges performing if the United States awaits a recession. That will negatively impact earnings. Therefore, the stock market may fail to attract investors.
Dow Jones Price Prediction – Technical Standpoint
Though Dow Jones might have an ugly fundamental outlook, the technical one presents a bullish price prediction. A declining wedge setup broke high following the inflation report of October, offering an irresistible trade as far as risk-reward is concerned.
The market usually retraces the declining wedge setup without hitting new lower lows. Thus, the ongoing rally might have more steam to target 14,000 provided Dow Jones doesn’t plunge beneath 10,500 pts. The Federal’s message remains crucial.
Nevertheless, we have around a month before the next Fed meeting (13 December – 14 December). Generally, November isn’t a reversal month for stocks. Thus, expect prices to exhibit bullishness during Thanksgiving, with the value area at 10,500 as an invalidation region.
Market participants can expect US companies to continue to struggle as the leading economy stares at a recession. That translates to an ugly picture for the stock market.
What are your views about the present economic outlook? You can comment below.