The stock market concluded the week on a high note, leading to gains in European markets as well. This positive sentiment may be attributed to the anticipated discussions between the U.S. and China. However, the stock market’s potential for further growth might be limited due to Moody’s decision to revise the U.S. government credit rating from stable to negative, which could affect investor confidence.
In addition, the past couple of weeks have seen volatile shifts in the market’s expectations of the Federal Reserve’s monetary policy, alternating between dovish and hawkish stances. Notably, Fed Chair Powell emphasized the need for more measures to combat inflation. Consequently, the dollar may continue its upward trend. Interestingly, stocks have remained bullish despite the downgrade by Moody’s and Powell’s hawkish stance.
Looking ahead, if Powell maintains a hawkish outlook, the dollar is likely to perform well. Therefore, monitoring U.S. yields, which have recently stabilized, is crucial. Any further rise in these yields could bolster the dollar, potentially leading to a pullback in the stock market at the same time.
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