The stocks have been doing rather well this year. For example, the S&P 500 has had a 16.0% climb so far, proving to be a great opportunity for investors. However, there is a distinct possibility of a stock market crash, meaning investors may need to be careful. We already see somewhat volatile stocks. Even the best day trading stocks suffered.
The first indicator of this is that the costs of hedging are rising. It is all particularly visible in the options market. The cost of the S&P 500’s ETF (SPY) is almost double in comparison to other options that could benefit from a stock market rally. This is an indicator that investors are becoming more careful with where they put their funds. They are less likely to invest in options that could promise them profits. Therefore, they might not be expecting a rally any time soon.
Key Factors Affecting the Stocks
The cause of this may be coming from recent data from the US. The recent data on consumer prices that will be coming this Wednesday paints a poor picture of the future economy. This is then likely to have an impact on the Fed’s decision in terms of interest hikes. They will likely announce this, if it happens, at a press conference with the Fed Chair. It remains to be seen how stock markets will react, but the expectations are not positive.
What is more telling is that there have been troubling signs in the market over the last few weeks, with volatile stocks. The S&P shows losses across multiple periods. We have seen an overall drop nearing 3.0% as of late. Alongside this, Europe and China have also been in financial trouble, furthering negative sentiment. Additionally, data has shown that US inflation has actually increased in August. It showed an annual increase of 3.6% in that month, whereas it was at 3.2% the month before.
