U.S. Inflation Soars, Stocks Swing 1,500 Points in Reversal

"In times of soaring inflation, the stock market seems to be full of surprising reversals," as the U.S. CPI grows at an annual rate of 8.2%, marking the eighth time this year that the U.S. has "broken the chart."

High inflation is increasingly burdening the lives of ordinary people, but in the second week of November, the U.S. stock market has once again witnessed a dramatic reversal.

Introduction: A major reversal in the U.S. stock market.

At that time, the Dow Jones Industrial Average fell to around 500 points, and the Nasdaq Index also fell by about 200 points, but then a rebound followed, first "reversing" by about 300 points, and then continuing to fluctuate. The entire market was filled with a strong sense of depression, but then a strong rebound occurred.

Throughout the rebound process, the S&P 500 Index's increase on this day reached 5.5%, and after this wave of rebound, the S&P 500's 52-week increase was raised to around -5%.

The Dow Jones Index's increase reached 3.2%, which is astonishing: What could cause such an instant change in the sentiment of the U.S. stock market?

The U.S. stock market is like a "roller coaster," and U.S. inflation continues to be at a high level. Does the contradiction between these phenomena indicate a great deal of uncertainty in the U.S. stock market?

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People inevitably have to think about what impact this phenomenon will have on the economy and financial markets, including commodities.

What impact will this have on the global economy?

The root cause of U.S. inflation seems to be traceable back to the COVID-19 pandemic, yet wave after wave of impacts continue to hit the U.S. economy like waves.The prices in the United States have skyrocketed to new heights, much like a rocket shooting straight up.

Among these factors, the rise in energy prices has also significantly contributed to high levels of inflation.

Domestically, consumer expenditures such as housing rent and food in the United States are also showing a rapid upward trend.

The cost of living for residents has soared dramatically, and most ordinary consumers in the United States are in a very difficult situation.

According to a survey conducted by the Federal Reserve, due to the difficulties in life caused by inflation, the proportion of low-income families has reached as high as two-thirds.

The CPI has also been calculated to have increased by 8.2% year-on-year, and even the core CPI is continuously rising.

Among them, food prices increased by 13.0% year-on-year, energy prices increased by 19.7% year-on-year, and housing prices increased by 6.6% year-on-year.

People inevitably have to think about what impact each interest rate hike decision by the Federal Reserve will have on American consumers and businesses?

Is there a certain relationship between inflation in the United States and interest rate hikes by the Federal Reserve?

Inflation in the United States has always been high and has even skyrocketed like a rocket.In terms of the prices of materials such as food and fuel, the year-on-year increase occupies a large part of the United States' inflation.

Moreover, the Independence Day of the United States has also largely driven up the level of consumption.

However, the Federal Reserve has been hinting that it will continue to raise interest rates more significantly than previously anticipated in the future.

Before the release of the inflation data in October, the interest rates in the United States have already reached the "peak".

I wonder how the Federal Reserve's interest rate hike policy will affect the inflation level in the United States?

The reversal of U.S. inflation and the stock market.

In the face of high inflation, the Federal Reserve has begun a series of plans to gradually raise interest rates.

In March 2022, the Federal Reserve raised interest rates by 25 basis points, and then raised them again by 50 basis points in May.

After a series of interest rate hikes, it has reached the level of 75 basis points.

In the subsequent series of interest rate hikes, inflation has also ushered in a "turning point", but the U.S. stock market did not follow a significant rise.In this situation, a rather severe reversal of price fluctuations occurred.

People inevitably pondered that there seemed to be a force of reversal at work.

However, before the CPI was disclosed, the market was filled with short-selling positions.

Amid high inflation, central banks around the world have made decisions to raise interest rates, but this has also limited the space for economic growth, putting significant pressure on business operations and financing.

After each round of interest rate hikes, the market was filled with panic, yet the U.S. stock market did not follow with a significant drop.

Before November, in this reversal, the sentiment seemed to have gradually calmed down after a round of panic, and there was no one in the market holding out hope.

This also seemed to become a signal of the "bottom", when the market is in a state of extreme pessimism, a reversal will occur in the market.

This phenomenon is known in the stock market as "Buffett's advice", which is "greed and fear alternate". When excessive greed leads to bubbles, the fear in the market will gradually diminish.

Moreover, during the process of raising interest rates, there is often a pause, and high interest rates will remain high for a period, which will allow the economy to gradually return to normal.

But against the backdrop of inflation, the pressure of living with inflation will also force American consumers to consume more rationally.According to data from social platforms, it is evident that users are placing greater emphasis on price when shopping; in the catering sector, they opt for lower-priced options; for travel, they choose closer destinations; and in social activities, they tend to select free events.

It is not difficult to discern that consumers have begun to gradually adopt frugal measures.

This trend is also reflected in demand: sales of supermarket floor-sweeping robots, sewing machines, and automobiles, among other things.

To this day, electronic products from major companies remain out of stock, but data indicates that consumers are not willing to pay for them and instead choose to cook their own meals.

So, what changes will the future inflation in the United States undergo after bottoming out and reversing?

When the Federal Reserve eventually stops raising interest rates and inflation continues to decline, the U.S. stock market may experience a strong uptrend, and this strong financing wave may bring significant risks to the market.

Global economic impact.

Almost all economies worldwide suffer from the "common disease" of inflation.

Central banks globally are generally raising interest rates.

Although inflationary pressures are high, central banks of various countries still need to leave room for economic recovery, and the International Monetary Fund also states that monetary and fiscal policies need to be coordinated.In situations of high inflation, it is not enough to rely solely on monetary policy; fiscal policy support is also necessary. Only then can a synergistic effect be achieved in the economy. This kind of support also triggers a series of chain reactions globally, causing difficulties for businesses worldwide, with increased financing costs and rising operational costs.

Inflation rates in various countries are showing an upward trend: in Japan, the CPI increased by 3.0% year-on-year; in the United Kingdom, the CPI increased by 10.1% year-on-year; in the Eurozone, the CPI increased by 10.7% year-on-year. It is evident that inflation rates in various countries have surpassed the 10% threshold.

In contrast, the CPI in our country increased by 3.0% year-on-year, which to some extent reflects the continued strong resilience of our economy. Moreover, in response to inflation in our country, the state is employing more measures to stabilize the economy. This is exemplified by the policies supporting the stable growth of our economy, which were released on November 1st.

These measures include expanding effective demand, maintaining the stability of national major agricultural product prices, stabilizing housing consumption, and a series of other initiatives. In addition, it is also crucial to ensure the implementation of these policies and to manage local debt effectively.Nations also maintain economic stability by intensifying the implementation of policies.

High inflation also brings a series of impacts on international trade. The United States' strategic release of oil reserves to cope with high inflation and a series of measures are affecting the global economy.

Adjustments in the turbulent market.

The U.S. stock market has experienced rises and falls, with constant fluctuations.

The Federal Reserve's interest rate hike policy objectively also leads to a market full of uncertainty.

High inflation and interest rate hikes are stirring up the financial market.

The fluctuations in the U.S. stock market also directly affect the global flow of capital, and to some extent, affect the market for commodities.

These reflections also indicate that continuing to raise interest rates in the context of high inflation may increase the risk of economic recession.

Before the CPI index is announced, if inflation improves, it will affect the speed and magnitude of the Federal Reserve's future interest rate hikes, which is conducive to market stability.

But no matter what, there will always be changes in the supply and demand relationship in the market, which will make the economy face uncertainty.The uncertainty has had a significant impact on the global economy and has also resonated in the commodity markets. After all, the most fundamental logic of commodities is the relationship between supply and demand. The strength in crude oil prices also indicates that the phenomenon of high inflation in the United States still exists, and these reflections show that the United States is still in a cycle of inflation. The commodity market often has a more accurate prediction of the economy. The current market uncertainty affects the economies of various countries. Countries need to find their own way out of these uncertainties and achieve sustainable development. China's economic resilience is very strong, and in the face of future uncertainties, it needs to respond flexibly. In conclusion, under the high inflation cycle in the United States, the stock market is also fluctuating. And the Federal Reserve's interest rate hike policy will also affect the global economy to a certain extent, even the domestic economy.Against the backdrop of gradually tightening monetary policy, the country needs to formulate corresponding policies to stimulate economic development.

The country must still prioritize economic development, seeking progress in stability, in order to achieve long-term development and stability.