Market Update

Markets have faced negativity due to tough macroeconomic conditions. However, history reveals that markets can bounce back swiftly. Exiting the market too soon may cause investors to miss out on pivotal moments.
This week, the European Central Bank (ECB) held interest rates steady, marking the first time in over a year. The deposit rate remains at 4%, with the main rate at 4.5%. President Christine Lagarde commented that despite some decreases, medium-term inflation is likely to stay high due to ongoing domestic price pressures. The ECB, mirroring the stance of the US and UK, hasn't dismissed potential rate hikes. However, many speculate that the peak for euro-zone borrowing costs is behind us. Lagarde also noted that economic growth risks lean towards the negative, particularly if increased rates have a more profound effect than anticipated. Recent events in the Middle East have added uncertainty to energy prices.
In the oil sector, prices stabilized with rising hopes that the conflict between Israel and Hamas could be managed, decreasing fears of oil market disruptions. The diplomatic endeavors of the US and Saudi Arabia to ensure Middle East stability have further allayed these fears.
In China, President Xi Jinping introduced new economic support measures, including the release of more sovereign bonds and an augmented budget deficit ratio. The market responded positively. Stocks surged as September ended, with reports indicating a nearly 12% increase in industrial firm profits, a result of policies to counteract the economic slowdown.
The US economy showcased remarkable growth, recording its quickest rate in almost two years. A preliminary report indicated a 4.9% annualized GDP growth rate, doubling the previous quarter's. This surge was mainly due to a 4% increase in personal spending, backed by a strong job market fostering high household demand. With the US economy's consistent performance, expectations are high that the Federal Reserve will guide it to sustainable growth.
The Federal Reserve is likely to maintain its current interest rates, given the recent spikes in US Treasury yields and a dip in the stock market, which have tightened financial parameters.
This week, investors closely watched earnings reports from major companies like Amazon.com, Alphabet, Meta Platforms, and Microsoft. These companies had previously significantly impacted market positivity earlier in the year. Although their recent results showed solid growth, increasing costs cast a shadow on their stock prices. Many in the market were likely looking for even more robust outcomes from these corporations to counterbalance the mounting concerns over interest rates and geopolitical instability. Still, the recent market decline has rendered valuations more appealing.