The NASDAQ forecast for May is now available. As the Fed raised interest rates to fight inflation, the forecast model predicted the market would move sideways and then down.
What Are the Factors Influencing the Markets?
High inflation, rising commodity and energy prices due to the Russia-Ukraine conflict, and slowing demand raise concerns about economic growth. The Fed tightens monetary policy to limit inflation. It’s unclear if this will cause a recession. This shows a stressed economy because rising prices hinder growth. The increased cost issue hurts growth and tech stocks since it reduces earnings and profit margins. Inflationary markets, value and commodity stocks tend to do better than growth and tech stocks.
Consumer Spending and the NASDAQ Forecast
The debate over whether the United States will enter a recession in 2023 continues. While the Fed continues to raise interest rates in order to combat inflation, it must strike an appropriate balance between driving down prices and preventing the economy from imploding. Raising interest rates too quickly and excessively may stifle the economy and precipitate a recession. While many predict a recession in 2023, the severity of the recession remains unknown. If the recession theory is correct, the tech-heavy NASDAQ may not be looking so good anytime soon.
Consumer spending is crucial to economic prosperity. April consumer expenditure in the U.S. was more than projected. Meanwhile, inflation slowed. These variables could boost second-quarter economic growth amid recession fears. Russia’s prolonged war against Ukraine and China’s zero COVID-19 policy have also fueled economic downturn fears. They’ve further complicated supply chains. Reduced savings could impede consumer spending, especially given growing borrowing costs.
It will be interesting to see if consumer spending habits change. Consumers have spent money on high-tech gadgets and luxury items in recent years because interest rates have been low. They may already have shifted their spending from high-priced items to daily necessities. If this situation persists, it may further harm the tech sector and impede NASDAQ performance.
How to Make Money Investing When Inflation Rises
Stock investing becomes more strategic as inflation rises and the Ukraine-Russia crisis worsens. Value stocks and commodities benefit from inflation. A high earnings-to-price ratio characterizes value stocks. During inflation, value stocks beat growth stocks. Productivity increases as demand increases. Commodities are seen as safe haven assets in uncertain times. But commodity prices are extremely volatile. To succeed, you must choose stocks carefully.
The May SP 500 Forecast Model
You may find more information about the S&P 500 May forecast model by visiting this page.