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In the face of weakening growth expectations, will the Fed persist with its tightening plan this week?
Equity markets have been under immense pressure since mid-September as investors are increasingly frightened by the rise in borrowing cost. Consumer demand is weakening across the globe. In the UK, the retail market is in a bloodbath, with former internet darling ASOS suffering a 40% dive in share prices this morning.
Many are expecting the Fed to dial back its hawkish policy to accommodate the shifting economic trend. If it oblige, there is a fighting chance that the Nasdaq Composite Index may reaffirm support at 6,800 again (see below).
If the Fed doesn’t, I suspect these technical support levels will be smashed through easily to the downside. The pattern of falling highs is a clear signal that those ‘stale bulls’ trying to get out. A 400-point decline is to be expected if the 6,800-6,900 support bands fails.
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Jackson has over 10 years experience as a financial analyst. Previously a director of Stockcube Research as head of Investors Intelligence providing market timing advice and research to some of the world largest institutions and hedge funds.
Expertise: Global macroeconomic investment strategy, statistical backtesting, asset allocation, and cross-asset research.
Jackson has a PhD in Finance from Durham University.