Key US stock indices have continued to adjust for more than a month. During this time, we have repeatedly drawn the attention of traders to the fact that not the best times are coming for the US stock market. Of course, it cannot be said that today everything was good for the indices, and tomorrow everything is already bad. Thus, this process of transition from good to bad can take up to six months. What has changed for stock indices? First, the fact that in the next couple of months the Fed may announce the curtailment of the quantitative stimulus program. And this is the most important moment and factor, since now the Fed is receiving $ 120 billion a month from the economy, and after the decision to wind down this amount will decrease. Accordingly, less money will flow into stocks, bonds, and cryptocurrencies. Thus, not immediately, but gradually, the stock market may begin to "cool down". Since many investors understand that the market cannot grow forever and continuously, they expect a correction (which has already begun). However, recently, many experts have also talked about a "bubble" that has inflated again in the stock market. Therefore, it is now important to understand when, according to investors' expectations, this "bubble" may burst. The Fed's rejection of the QE program and the incomprehensible situation with the debt limit in the United States may be just the reasons why investors will withdraw money from the stock market. Especially if inflation starts to slow down in the coming months. After all, now, in times of high inflation, investors are looking for tools that will save their assets from depreciation. And what assets come to your mind when you need to protect your money from inflation? Bitcoin, shares of Apple, Tesla, Microsoft. It is these quotes that have been growing in the last year and a half, as if by leaps and bounds.
But let's go back to the US government, or rather to Congress, where there is an active debate about raising the US debt limit or "freezing" it for a while. The Lower House of Congress agreed to take this decision, but it is worth remembering that the Democrats have the majority in the Lower House, who support Joe Biden. But the Senate, which is exactly half made up of Democrats, continues to try to convince Republicans to support this decision. Republicans refuse, although they understand that Democrats can decide to raise the borrowing limit on their own. However, in this case, they want to be able to say that this decision was made only by the Democrats, and only they are responsible for it. The main claim of the Republicans is the lack of control over the total debt, the lack of proposals to reduce it, the lack of a clear spending plan for the Democrats. In general, this whole situation with the "pre-default" state of the States may cause some panic in the stock market. Considering all of the above, we believe that the Dow Jones, NASDAQ, and S&P 500 will continue to adjust.