U.S. stocks have not fallen by more than 5% since October 30, 2020. The recent decline is still within the normal range, while Evergrande and debt ceiling news are drivers of market movement.
The debt ceiling issue will eventually be resolved, but there will certainly be an impact on the market during the negotiation process.
The market may rebound in the short term. After the rebound, whether it can reach new highs or break below the current lows depends on economic performance during the ongoing epidemic.
An energy crisis has resulted in severe gas shortages in Britain, skyrocketing global natural gas prices, and power cuts to more than half of China’s provinces. This is caused by supply-side issues rather than demand driven upward by an overheating economy.
Short-term energy supply shortages will cause the price of gasoline to continue to rise, which will worsen existing supply chain challenges and prolong inflation that was originally considered a short-term issue.
Just as this energy crisis was caused by many unrelated events occurring simultaneously, the current increase in inflation is also caused by many coincidences and may continue longer than expected. A market fueled by highly optimistic investors while battered by market uncertainties is bound to undergo substantial adjustments in the future.