Stock markets remain high despite rising profitability and falling liquidity. The Fed's decision is tomorrow

The day before the Fed's decision, stock markets, including the American and German ones, seem to remain at very high levels, taking into account what is happening with the yields of US bonds or, for example, the decline in risk appetite on the cryptocurrency market. The stock market, despite the recent lack of evidence to maintain growth, may not have entered the phase of a major correction yet.

Recent macroeconomic data show that the American consumer is spending less than previously thought, and in turn, inflation is not falling as quickly as previously thought. Thus, the yields of American bonds quickly increased to 4,34%, which is the highest value in a month. Moreover, bank reserves decreased year-on-year Fed by approximately USD 300 billion y/y due to the base effect from last year. This factor seems to correlate quite well with cryptocurrency market, which reacted in a model way to the contraction of annual liquidity. Perhaps the American stock market will react to these factors with a delay, and the Fed's decision on interest rates along with new macroeconomic projections may also be a flashpoint.

S&P 500 with a chance for a larger correction?

Latest corrections on S & P 500 were a maximum of 1,7-2,5%. We are talking about corrections in the upward movement that has been going on since the beginning of this year. With a larger correction in mind, we are talking about a possible move of 4-6%, which in turn could mean a retreat towards 5000 points. The chances of such a correction seem to be increasing at least until the end of March.

WIG20 under pressure from Western markets?

It should be noted that the peak at Wig20 took place almost a month ago, when the markets in the USA and Germany continued to grow. Our Polish market is therefore weaker than the Western ones, and if the above-mentioned larger correction were to occur there, the WIG20 could reach around 2315 points. In this case, the next range could be around 2200 points. This would mean a possible correction from the peak exceeding 10% on WIG20. For now, circumstances seem to favor such a scenario, and prospects for bulls could re-emerge come April.