The key indices of the US stock market - Dow Jones, NASDAQ, and S&P 500 - ended Thursday with a new strong fall. As we said earlier, the US stock market is currently being adjusted and, according to our estimates, it will do so for quite a long time. Until the Fed raises the rate to at least 3%. Since it is not known how such an increase will affect inflation in the United States, it is not known whether the rate will increase further after reaching, for example, 3%. However, 3% is now a kind of benchmark. This is higher than the neutral rate (2.5%) and lower than the requirement of the "hawk to the bone" James Bullard (3.5%). Many experts now note the fact that the American economy has "overheated", but the Fed will have to put a lot of effort into "cool" it to exactly such a state that inflation has decreased, but at the same time economic growth has remained good. Experts believe that it is a great art to manage the economy so delicately, and the Fed has not always been able to apply monetary policy instruments so well. However, at the current stage of tightening, in principle, it is not even particularly important how often and how much to raise the rate. Therefore, most Fed members agree that the rate should be raised gradually, to 2.5%, and then look at the reaction of inflation and markets.
The geopolitical picture remains very important for the markets and the whole world. Yesterday, it became known that Russian President Vladimir Putin personally ordered a stop to the storming of "Azovstal" in Mariupol. Thus, on the territory of the huge plant, there continues to be a division of the Armed Forces of Ukraine "Azov", which continues to control a certain part of Mariupol. Consequently, Mariupol has not fallen, and the attacks on Azovstal have stopped. At least, according to the assurances of some media. This is, in fact, a very important moment in the entire military conflict. Earlier, President Zelensky said that if the defenders at Azovstal were killed by Russian troops, Ukraine would officially withdraw from any further negotiations with Russia. Is there any way to link these two facts together? We don't know the answer to this question, but somehow this is a rather important and incomprehensible event. We need to continue to monitor the situation.
Meanwhile, the European Union is preparing a new package of sanctions against Russia, and the United States has closed its ports to Russian ships. The head of the European Council Michel Borrel personally visited Kyiv and met with Vladimir Zelensky, after which new sanctions against Russia were announced at a press conference. This time, it is expected that the sanctions will affect the oil and gas industry. At the same time, German Chancellor Olaf Scholz came under a barrage of criticism for his refusal to supply heavy weapons to Ukraine. As early as next week, the German Parliament may pass a vote of no confidence in him.