The equity markets are having one of the worst years in history. At this point of the year (19 May), MSCI World Index has never been this low (percentage-wise) since the start of the index. Hawkish FED, overpriced fundamentals, post covid weakness, supply chain problems, Ukraine war, and China lockdowns made a rare combo of problems for global equity markets. But is the pain over, or do we have a long way to go?
There are some positives that may limit further down moves. First of all, China’s covid situation is getting better. The central bank lowers the 5-year loan prime rate and wows to support the economy. The government is planning massive infrastructure investment to boost the economy.
There is no indication of new, more dangerous Covid-19 variants so far. Globally, the pandemic situation is getting a lot better.
Most of the rate hikes from the FED and ECB might have been already priced in.
Most of the earnings reports announced better than expected and optimism of later periods is increasing despite recession fears.
Still, recession or stagflation fears dominate the markets and there is a clear downtrend exists since late 2021. But with more than %18 falls from the start of this year, the markets may try to find a bottom around the lower line of the downtrend channel and the Fibonacci %38.2 level. But the probable bottom might not cause a price surge like the previous ones the last years because of the bear market, yet a slightly positive counter trend within the channel is possible for the shorter term.
