U.S. stock market already trading in recession

The U.S. stock market is already trading in a recession. There are two observations.

1. Crude oil plummeted

Falling oil prices mean that demand for oil is sluggish, industry demand is falling, and the quantity of products produced will shrink, which is the embodiment of deflation and economic recession.

Although two days ago, Putin said that Russia may cut oil production, which boosted crude oil to rebound by 4%, but eventually continued to fall and hit a new low.

Anyone who has experienced 2020 knows that oil prices even went negative at that time, which was the drop in crude oil prices due to concerns about the stagnation of the global economy. The current decline in crude oil prices is dominated by recession, supplemented by interest rate hikes to curb commodity prices.

2. Nasdaq and Dow Jones diverge

The starting point for this round of U.S. stocks was when the CPI was higher than expected in September, and U.S. stocks opened lower and moved higher. Since then, the Nasdaq has rallied just 10%, while the Dow has rallied 5,000 points, or nearly 20%.

Due to the sensitivity of growth stocks to interest rates, Nasdaq is theoretically more boosted by the end of interest rate hikes. Therefore, the peak of interest rates should be a greater benefit to Nasdaq, so why is there such a deviation?

The reason behind this may be fears of a recession. Everyone knows that large technology companies in Silicon Valley in the United States are actively optimizing their personnel structure, which is a microscopic manifestation of the macroeconomic recession.

Recession fears have held back the Nasdaq’s rally, although interest rates are already at peak levels and will no longer weigh on stock market valuations. The companies in the Dow Jones, due to their defensive attributes of partial value stocks, including that they are big blue chips with huge market capitalization, such as finance and consumer staples, are more resistant to economic recession.

From the bottom of 2020, the Dow Jones has risen twice, while the Nasdaq has risen by 2.5 times. For the small-cap growth stocks in Nasdaq, now is the time for them to repay their debts.

Then the next question is whether the market has fully priced the economic recession. Then we will reveal the answer tomorrow and the day after tomorrow. Tomorrow is the announcement of the US CPI, and the day after tomorrow is the interest rate meeting. We will wait and see. I have written the article in advance. .

$Nasdaq Composite Index(.IXIC)$ $S&P 500 Index(.INX)$ $China Internet Index ETF-KraneShares(KWEB)$

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