Categories: Market Overview

FxPro: Markets moved from irrational exuberance to anxiety

The dollar continues to develop a rollback from the multi-month highs, falling to 96.0 on DXY while triggering EURUSD to reach a two-week high, at 1.1450. Nevertheless, dollar’s rollback does not help any other assets, and although the weakening of the dollar usually sets offs growth in the stock and commodity markets, this is not the case this time.

On the U.S stock markets, we see a continuous sell-off of stocks of high-tech companies. Nasdaq Index had lost 3% on Monday, and at the start of trading on Tuesday plummeted to lows seen back in May, subsequent to the decline of stocks of market giant such as Google, Amazon and Apple. Pressures on Apple shares have plummeted the company’s capitalization by 16.5% since the beginning of the month. Meanwhile, Facebook lost 40% from its peak values in the middle of the year and sank to low levels, which we have not seen since February 2017.

Powell’s words in regard to the potential pause in the rate hikes induces a pessimistic sentiment in the market participants about resilience of the economy. Demand for U.S. Treasury bonds was on the rise. The words of Fed’s chairman were perceived as a signal that the Central Bank is not as confident in maintaining such a strong rate of economic growth.

With an exceptionally strong economy, growth stocks had the highest demand, and with the economy growth rate close to the trend levels, the focus of investors shifts back to the company’s performance. Under these circumstances, markets shifted their attention to the long-term average P/E ratios, in which the highest rates were in the IT Sector.

It is logical to fear that the correction of high-tech companies might spread to the entire stock market. It happens most of the time, but one should not rush to conclusions.

Based on what we have seen, it can be said that the end of the easy-money era, initiated in early October, resulted in the realisation of a more realistic view of the markets. This was manifest not only in the shift from growth stocks to value stocks, but it was also very noticeable in the dynamics of Crude Oil (-25% of October’s peak value) as well as in the Cryptocurrency market (-30%). Markets are on the way from irrational exuberance to anxiety. However, we cannot exclude the case that emotional sales may drag indices low on an emotional sell-off, throwing them to the other extreme, fear, in the upcoming weeks.

The FxPro Analyst Team

Our team consists of financial market experts. Our dedicated professionals prepare reviews on the foreign exchange market situation, Crude Oil, Gold and Stock Indices. All the analysts are regularly published in the world leading economic media.

Share
Published by
The FxPro Analyst Team

Recent Posts

Video: Dollar and Indices are trying to find footing after the fall

The dollar experienced a sell-off but rallied back up by the end of the week.…

3 days ago

What is next: BoJ, Fed, SNB & BoE Rates

The new week will be packed with economic data and decisions from key central banks.…

3 days ago

Dollar attempts to rebound after oversold conditions

Despite economic factors working against the dollar, its oversold condition helped it this week or…

3 days ago

USDCAD Wave Analysis – 14 March 2025

USDCAD: ⬇️ Sell - USDCAD reversed from key resistance level 1.4500 - Likely to fall…

3 days ago

Solana Wave Analysis – 14 March 2025

Solana: ⬆️ Buy - Solana reversed from the long-term support level 113.75 - Likely to…

3 days ago

Adobe Wave Analysis – 13 March 2025

Adobe: ⬇️ Sell - Adobe broke round support level 400.00 - Likely to fall to…

3 days ago

This website uses cookies