Understanding the markets this week: May 17th, 2021

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    The Nasdaq is having a bad day … and month

    Wow what a week. Stocks are taking it by the chin in Canada, the United States, and around the world. And US tech stocks, which posted positive gains in 2020, will be hit harder than the broader market.

    The tech-heavy Nasdaq 100 (QQQ) is down 7% last month, while the S&P 500 (IVV) is down 1.5%. The Nasdaq is below January 8, 2021. The tech heavy and certainly still growth-heavy Nasdaq is having trouble finding another gear. On Tuesday, May 11th, the worst day since March, it fell 2.6%.

    Nasdaq can’t break out of gravity by 2021 – and that gravity is the power of inflation fears and the fear of rising interest rates.

    When investors consider inflation fears, they will move away from technology stocks because they view technology stocks as longer-term assets that will only pay off in the future.

    On Tuesday of this week, the US released inflation data (CPI) that surprised with its positive effects: Significant inflation is created in the early stages of the economic restart.

    Data from the US Bureau of Labor Statistics yesterday showed that January-April inflation rose the fastest since 2008 this year. The consumer price index was 4.2% versus expectations of 3.6%, which is already above the Fed’s 2% target.

    This from S&P Global, sent to my email inbox …

    “According to economists, rising unemployment and high inflation (‘stagflation’) can result if the money supply is pumped too hard and fast by the authorities, especially if there is also a supply shock – an increase in the price of oil, for example. The current massive US fiscal and monetary stimulus, coupled with soaring commodity prices, the shock of last Friday’s employment report, and yesterday’s staggering inflationary pressures – MoM growth was the highest since 1982 – has scared the markets. ”

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