(Author: Pan Yiheng)
Yingwei Financial Investing.com – On Tuesday, the US stock market continued its decline, falling 0.84% to 34,577.57 points; falling 0.57% to 4,443.05 points; falling 0.45% to 15,037.76 points.
It is worth noting that this is the sixth time the Dow Jones Index has fallen in the last 7 trading days. Both the S&P 500 Index and the Nasdaq Index have fallen for six consecutive trading days. Is the continuous decline in US stocks a short-term adjustment or a quiet turn?
Slowing inflation hardly prevents U.S. stocks from falling
On Tuesday evening, Beijing time, the US Department of Labor released August CPI inflation data.
The data shows that the non-seasonally adjusted annual rate of CPI in the United States in August was 5.3%, which was in line with expectations; but the core CPI in the United States rose slightly by 0.1% in August, the lowest increase in six months.
The sharp drop in the price of second-hand cars suggests that inflation may have peaked, but with continued supply constraints, inflation may remain high for a period of time. The general slowdown in price pressures is consistent with Fed Chairman Powell’s long-term view that high inflation is only temporary.
The US government welcomed the data, believing that it indicates that inflation will be temporary, on the grounds that car prices have fallen and food price increases have slowed.
After the data was released, the three major U.S. stock indexes all gapped and opened higher. Optimistic investors believed that the CPI data indicated that inflation had peaked and bought more time for the Fed to raise interest rates. The slowdown in inflation will weaken the Fed’s reduction in asset purchases. pressure. However, the market obviously did not think so. The US stocks opened higher and then fell lower. In the end, the three major stock indexes all recorded declines.
Midland will continue to reduce asset purchases
Although inflation has slowed down, it will remain at a high level for a period of time, and it will far exceed the Fed’s 2% inflation target. The Fed’s determination to reduce the scale of asset purchases has not changed.
Some economists expect that Fed officials will raise their inflation forecasts in the summary of economic forecasts released at the end of the policy meeting on September 21-22. The core personal consumption expenditure (PCE) price index, an inflation indicator favored by the Federal Reserve, increased by 3.6% in the 12 months to July, which was the same as the increase in June. The August data will be announced later this month.
Analysts expect the Fed to announce in November that it will begin to reduce its monthly large-scale bond purchase program.
The U.S. economy is slowing down, and the government plans to increase taxes
We were also beforeWall Street collectively sing empty!Time for U.S. stocks is running outMany articles have emphasized that the comprehensive epidemic, consumption, inflation and other signs indicate that the US economic growth rate will slow down in the third quarter. The major investment banks on Wall Street have also lowered US economic growth expectations. China also admits this.
The U.S. government continues to use huge government expenditures to stimulate economic recovery. Recently, the two parties in Congress have quarreled with the US$3.5 trillion spending bill. The Biden administration is also facing the problem of a debt ceiling. All these problems need money to solve. , So it was natural to think of taxation.
Recently, the Democratic Party proposed to increase the corporate tax ceiling from 21% to 26.5%, which is lower than the 28% required by Biden. The capital gains tax cap has been raised from 20% to 25%, which is lower than the 39.6% required by Biden.
Two senior Democrats in the U.S. Senate also announced a proposal to impose a 2% special consumption tax on corporate stock repurchases to raise funds for President Biden’s US$3.5 trillion domestic investment plan. The proposal, called the “Stock Repurchase Responsibility Act,” will encourage large companies to invest in employees, rather than increase the wealth of investors and executives by pushing up stock prices.
These two tax plans are still in the proposal stage, but if they are passed by Congress in the future, the economic slowdown and the double blow of tax increases will put greater pressure on the stock market.
Entering the traditional off-season of the stock market in September, coupled with the superposition of various negative factors, it is not surprising that the U.S. stock market has seen a correction. Although it seems that it is only a short-term correction, there is no clear evidence of a bear market, but take precautions against risks in advance The preparation for this is definitely not wrong.
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