For months macro doesn’t matter and then suddenly it does.
It was a big week for central banks and macro factors played a large role in deciding the overall sentiment and direction of the global markets.
The US Fed left interest rates unchanged on Wednesday but guided for a hawkish view with commentary on room for further rate increases in 2023.
If you’re new to investing, here is a general rule of thumb - market hates a hawkish Fed and any talk of interest rate increases. Why? You can read all about it here and here.
So how did the market actually react to Fed commentary?
Short answer, not well.
Nasdaq 100 closed🔻3.3%, S&500 at🔻2.93% followed by Dow Jones at🔻1.89% . Our markets didn’t fare all too well either, Nifty closed the week at 🔻2.57%, Midcap 100 at 🔻1.69% and Smallcap 100 at 🔻2.48%.
Other important macro indicators like US10Y, Dollar Index, Oil and Gold are all entering uncomfortable territory.
But wait! Not all is gloom and doom at the macro front.
In some happy macro economic news, Indian bonds are finally cementing their place in Global Emerging Market Bond Index. This is an event that has been in the making for several years now.
Inclusion in the global bond index will help India attract more foreign capital towards its bonds - currently a mere 2% of India’s bonds are owned by foreign institutions. Higher demand for bonds helps the Govt easily raise funds and that rupee at 82.95/USD, expect that to appreciate as well.
There is a more detailed video in the curated section to understand the full impact.
So what does all of this mean for you as an investor?
I have been advocating caution for several weeks now in all the past issues of TheWrap - here, here and here, for example.
Combine the deteriorating macro indicators along with market breadth that is close to its all time high and it doesn’t take much to understand that we are in turbulent times ahead.
A few months of mild correction and consolidation seems to be on the cards.
Time to dust off that watchlist and prepare for a buying opportunity.
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