Markets very nervous before the Fed

Another stock market session marked by very high volatility yesterday. US stocks repeated Monday’s pattern (plunge then rebound), but ended up falling back. The Nasdaq gave up another 2.3% and is down 15.6% from its peak. The S&P500 is down 8.6% since the beginning of the year. Long term rates remain stable but the US 10 year has also been yo-yoing during the session.

Markets are nervous with Russia and ahead of the Fed meeting today. Growth concerns are on the rise. The IMF has significantly revised its forecasts downwards (see our News) and US household confidence is deteriorating: they expect a little less inflation, but their income outlook is falling even more.

Today, the Fed meeting will be the focus of attention. It is possible that Jerome Powell will succeed in calming the markets and provoke a rebound in risky assets, but the underlying trend is not reassuring, particularly given the planned reduction in liquidity in the markets (see our Report published yesterday on the issues and prospects of US monetary policy for more details). Earlier, the Bank of Canada may have raised its key rate from 0.25% to 0.50%; opinions are divided. Volatility guaranteed in the markets.