# Stock Market Direction (Part 2)
**URL:** https://forum.inderes.com/t/porssien-suunta-osa-2/12591
**Category:** Ylätason sijoituskeskustelu
**Tags:** pörssi, makrotalous
**Created:** [January 28, 2021, 1:55pm UTC](https://forum.inderes.com/t/porssien-suunta-osa-2/12591 "2021-01-28T13:55:02Z")
**Posts on this page:** 20
**Page:** 246
### Author:  [@Jarnis](https://forum.inderes.com/u/Jarnis)
#### Post date: [May 3, 2022, 2:06pm UTC](https://forum.inderes.com/t/porssien-suunta-osa-2/12591/5463 "2022-05-03T14:06:05Z")
[https://twitter.com/LiveSquawk/status/1521490288954548224](https://twitter.com/LiveSquawk/status/1521490288954548224)
[https://twitter.com/LiveSquawk/status/1521490615489511424](https://twitter.com/LiveSquawk/status/1521490615489511424)
[https://twitter.com/LiveSquawk/status/1521490690156515330](https://twitter.com/LiveSquawk/status/1521490690156515330)
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### Author:  [@Mark\_Renton](https://forum.inderes.com/u/Mark_Renton)
#### Post date: [May 3, 2022, 3:36pm UTC](https://forum.inderes.com/t/porssien-suunta-osa-2/12591/5464 "2022-05-03T15:36:01Z")
Aren’t these numbers quite positive considering that most experts are predicting an inevitable apocalypse at any moment 🤔😀
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### Author:  [@Verneri\_Pulkkinen](https://forum.inderes.com/u/Verneri_Pulkkinen)
#### Post date: [May 3, 2022, 4:07pm UTC](https://forum.inderes.com/t/porssien-suunta-osa-2/12591/5465 "2022-05-03T16:07:05Z")
> [@Mark\_Renton](#):
>
> Aren’t these numbers quite positive, considering that most experts are predicting an inevitable doomsday at any moment 🤔😀
The situation is admittedly complicated, and there are a lot of bearish views circulating: the contrast to a year ago is huge. 😅
In principle, strong economic figures from the United States are good news, because stagflation fears are kept in check.
On the other hand, good figures fuel interest rate hikes. A strong economy can withstand them, but the effect on stocks is negative due to rising yield requirements as the exchange rate, i.e., interest rates, rises. On the other hand, a strong economy supports results and stocks.
The optimal scenario would be for inflation to deflate towards the 2% target and for the economy to grow moderately at the same time. Most importantly, that these would again become somewhat predictable.\*
The most unpleasant scenario for stocks would be stagflation, which would be fought with interest rate hikes even if the economy struggled in a recession and stocks were in a ditch.
Perhaps to some extent, the simplified “big picture” can be seen as a balancing act between these two outcomes at the moment.
The same applies to Europe and the Helsinki stock exchange, but here the situation is even more difficult due to dependence on Russian energy and a weaker economy.
European stock exchanges were supposed to experience the fastest earnings growth in the world this year; that went south for a change. 🥵
\*If we were certain that a 3% 10-year interest rate is the peak and after that interest rates would bottom out, I would dare to bet on a fairly significant stock rally. 💸
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### Author:  [@jaska7](https://forum.inderes.com/u/jaska7)
#### Post date: [May 3, 2022, 4:26pm UTC](https://forum.inderes.com/t/porssien-suunta-osa-2/12591/5466 "2022-05-03T16:26:38Z")
> [@Verneri\_Pulkkinen](#):
>
> The situation is admittedly complicated, and there are a lot of bearish views circulating: the contrast to a year ago is huge.
Amidst bearish views, it’s good to glance at the other side’s perspective as well.
Some good points in this thread.
[https://twitter.com/wolfejosh/status/1521155236131479553](https://twitter.com/wolfejosh/status/1521155236131479553)
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### Author:  [@Verneri\_Pulkkinen](https://forum.inderes.com/u/Verneri_Pulkkinen)
#### Post date: [May 3, 2022, 6:00pm UTC](https://forum.inderes.com/t/porssien-suunta-osa-2/12591/5467 "2022-05-03T18:00:49Z")
> [@jaska7](#):
>
> Amidst the bearish views, it’s good to glance at the other side of the coin.
>
> Some good points in this thread.
>
> [https://twitter.com/wolfejosh/status/1521155236131479553](https://twitter.com/wolfejosh/status/1521155236131479553)
Good point. I’m not sure if this will happen at the next meeting, but this view that the Fed will eventually have to slow down on interest rates and that we might soon have a new QE (Quantitative Easing) in place is being raised here and there.
That would be BULLISH, especially for growth companies.
It’s also worth remembering that the Fed hasn’t even tightened the screws much yet, but the market is currently doing it for them (interest rates, crashing stocks).
But, in many ways, the economy doesn’t yet show that kind of weakness.
And, for example, wages are rising at a considerable pace. Here’s the Atlanta Fed’s wage tracker. Wage growth makes inflation more sustainable, as there is money to spend. Of course, a 6% increase is below 8% inflation in the United States, but still.
Nor does the housing market yet show a cooling of prices, even though, for example, loan applications are falling in the country.
> **[Wage Growth Tracker](https://www.atlantafed.org/research-and-data/data/wage-growth-tracker)**
>
> The Atlanta Fed’s Wage Growth Tracker edged up to 3.7 percent in February from 3.6 percent the prior month. For those not changing jobs, the Tracker also edged up in February, to 3.6 percent, while for those changing jobs the Tracker held steady at...
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### Author:  [@musa\_2](https://forum.inderes.com/u/musa_2)
#### Post date: [May 3, 2022, 6:42pm UTC](https://forum.inderes.com/t/porssien-suunta-osa-2/12591/5468 "2022-05-03T18:42:51Z")
That, too.
Some time ago Powell said that the labor market is “unsustainably hot.” And since then the latest data tells us it’s getting even hotter.
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### Author:  [@Juurikki](https://forum.inderes.com/u/Juurikki)
#### Post date: [May 3, 2022, 6:51pm UTC](https://forum.inderes.com/t/porssien-suunta-osa-2/12591/5469 "2022-05-03T18:51:54Z")
> [@Verneri\_Pulkkinen](#):
>
> Wage growth makes inflation more sustainable when people have money to spend. Of course, a 6% increase is less than 8% inflation in the US, but still.
Real wage development in this situation is negative (6% - 8% = -2%). This means it reduces consumer demand, if other variables, such as the savings rate going negative, are ignored.
The situation in the US is not as worrying as it is here in Finland. The more consumer demand is cut by low wage increases, the worse the economy performs.
On an investment forum, wages are naturally viewed solely as an expense. For an individual company, this perspective is justified, albeit one-sided. From the perspective of society and the economy as a whole, excessively small wage increases, i.e., real wage reductions, are like peeing in your pants in the cold due to reduced consumer demand.
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### Author:  [@Tunturisusi](https://forum.inderes.com/u/Tunturisusi)
#### Post date: [May 3, 2022, 8:27pm UTC](https://forum.inderes.com/t/porssien-suunta-osa-2/12591/5470 "2022-05-03T20:27:30Z")
That’s how it is, but the reason why wages are not raised here in Europe is that competitiveness, productivity, and investments must be maintained. On the other hand, inflation has also been assumed to be temporary. What would happen if increased costs were directly translated into wages? Here, wage development is usually only in one direction… wages do not flex downwards. Here, wages should also flex downwards when inflation starts to decline.
War, sanctions, energy, raw materials, and production bottlenecks are the cause of inflation here, not that things are somehow exceptionally good here. The fact that price increases are due to something other than an economic boom does not really provide room for any major wage increases.
It would also go quite badly if competitiveness were destroyed by large wage increases. Here, a certain amount of patience is a virtue. Or then wages should also flex in the other direction.
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### Author:  [@Telemaster](https://forum.inderes.com/u/Telemaster)
#### Post date: [May 4, 2022, 4:10am UTC](https://forum.inderes.com/t/porssien-suunta-osa-2/12591/5471 "2022-05-04T04:10:06Z")
Tuchman’s insights from behind the wall.
> **[Kasvot ovat tutut, mutta nimen muistaa vain harva – Wall Streetin ”Einstein”...](https://www.kauppalehti.fi/uutiset/a/c1f82e39-fb8c-4287-85dd-00fd0cc4e6bd)**
>
> Keskuspankki Fedin odotetaan päättävän keskiviikkona suurimmasta ohjauskoron kertakorotuksesta 22 vuoteen. Vanhoista ohjekirjoista ei ole juuri iloa, kun sijoittajat käyttäytyvät arvaamattomasti, sanoo New Yorkin pörssin legendaarinen meklari Peter...
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### Author:  [@Marianne\_Palmu](https://forum.inderes.com/u/Marianne_Palmu)
#### Post date: [May 4, 2022, 4:23am UTC](https://forum.inderes.com/t/porssien-suunta-osa-2/12591/5472 "2022-05-04T04:23:27Z")
Good morning!
The US economy has already been extensively discussed here before the Federal Reserve’s interest rate decision. So, I will be back online at 9 PM to summarize the most important topics of the interest rate decision. In a nutshell: a 50 basis point hike is expected, and of course, the question is whether a 75 basis point hike is next on the table (it is in the futures market probabilities, but not in Bloomberg’s consensus). The labor market is really strong, but will the consumer hold up? I would summarize the problem perhaps like this (an excerpt from the meeting preview, with a link to the full text below):
> **[Federal Reserven korkopäätös tänään: Levoton keskuspankkiiri - Inderes](https://www.inderes.fi/articles/federal-reserven-korkopaatos-tanaan-levoton-keskuspankkiiri)**
>
> ”Ja elämä on helppoo sillon kun on joku josta pitää kii Ei tarvitse mennä nukkumaan itkeäkseen itsensä unelmiin” Näin laulaa Dingo Levoton tuhkimo -kappaleessaan. Keskuspankkiirin elämä ei juuri...
Welcome to join the lines tonight 🙂
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### Author:  [@Juurikki](https://forum.inderes.com/u/Juurikki)
#### Post date: [May 4, 2022, 4:57am UTC](https://forum.inderes.com/t/porssien-suunta-osa-2/12591/5473 "2022-05-04T04:57:46Z")
> [@Tunturisusi](#):
>
> That’s how it is, but the reason why wages are not raised here in Europe is that competitiveness, productivity, and investments must be maintained.
Europe has already strengthened its competitiveness compared to the US by 5% through the weakening of the euro. Is Europe so unfortunate that it needs another 5% increase in competitiveness through the reduction of real wages?
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### Author:  [@Juurikki](https://forum.inderes.com/u/Juurikki)
#### Post date: [May 4, 2022, 5:17am UTC](https://forum.inderes.com/t/porssien-suunta-osa-2/12591/5474 "2022-05-04T05:17:41Z")
> [@Tunturisusi](#):
>
> On the other hand, inflation has also been assumed to be temporary. What would happen if increased costs were directly reflected in wages? Here, wage development is usually only in one direction… wages do not flex downwards.
Precisely for this reason, during times of unpredictable inflation, a new agreement model is needed for wage increases, consisting of a base part of a couple of percent and an additional part determined by inflation. The labor market parties can then negotiate among themselves what portion of the inflation exceeding the base part will raise wages.
With this agreement model, wage increases would also flex downwards if inflation were to decide to decrease.
The heading is about the direction of stock markets. A wage increase model that takes inflation into account would also benefit the stock market, as spending would become more even and a collapse in consumer demand would be avoided.
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### Author:  [@musa\_2](https://forum.inderes.com/u/musa_2)
#### Post date: [May 4, 2022, 6:02am UTC](https://forum.inderes.com/t/porssien-suunta-osa-2/12591/5475 "2022-05-04T06:02:04Z")
There’s a very broad range of macroeconomic data available. But, as I recall, the Fed’s mandate isn’t about a “strong economy” or countering recessions, but rather about promoting employment while ensuring price stability.
At Jackson Hole in August 2020, the Fed decided it would no longer use models or forward-looking indicators at all.
Labor market data is glowing hot. The Fed isn’t trying to model future developments but acts based on this red-hot data.
The starting point now is that the Fed is tightening financial conditions and allowing the markets to tighten them independently until the labor market is _sustainably warm_.
What is the timeline and through what stages does unsustainably hot become sustainably warm?
I’m certainly not trying to guess.
In my opinion, the Fed has an absurd hubris in its approach to asset values.
According to the Fed, asset values don’t need any attention as long as inflation is moderate. Moderate inflation, in the Fed’s view, indicates that the wealth effect hasn’t swelled too much to overheat the economy.
The Fed imagines that it can, at any time it wishes, suddenly adjust asset values just right downwards, after first allowing them to swell uncontrollably, mostly as an indirect consequence of the Fed’s actions, but also quite directly by pumping them up (MBS purchases).
Now we are very firmly at the stage where the Fed hopes for uncertainty that gnaws at the lives of the well-off, as to whether they can treat asset values as mark-to-market.
Time will tell when something happens that changes the Fed’s attitude.
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### Author:  [@Tunturisusi](https://forum.inderes.com/u/Tunturisusi)
#### Post date: [May 4, 2022, 6:04am UTC](https://forum.inderes.com/t/porssien-suunta-osa-2/12591/5476 "2022-05-04T06:04:34Z")
I agree with this.
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### Author:  [@Verneri\_Pulkkinen](https://forum.inderes.com/u/Verneri_Pulkkinen)
#### Post date: [May 4, 2022, 6:13am UTC](https://forum.inderes.com/t/porssien-suunta-osa-2/12591/5477 "2022-05-04T06:13:22Z")
> [@Juurikki](#):
>
> Europe has already strengthened its competitiveness by 5% compared to the USA through the weakening of the euro. Is Europe so unfortunate that it needs another 5% increase in competitiveness through real wage cuts?
To this good point, one could add that competitiveness should perhaps be considered more in the context of individual Eurozone countries.
Judging by what an export monster the Eurozone is, we do not have a competitiveness problem as a whole. An individual country like Finland might have one. But Germany hardly does. In fact, probably the best thing that could happen to the Eurozone would be “too” sharp a rise in wages in Germany, which would stimulate the country’s weak domestic consumption and shift jobs to less prosperous countries. 🙂
From this perspective, German wage increases would be quite… bullish. 😛
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### Author:  [@Expaco\_b](https://forum.inderes.com/u/Expaco_b)
#### Post date: [May 4, 2022, 6:18am UTC](https://forum.inderes.com/t/porssien-suunta-osa-2/12591/5478 "2022-05-04T06:18:31Z")
Wait, could you clarify why Germany would be doing particularly well right now?
The country is an export-oriented industrial nation, and exports are currently faltering, for example, due to a component shortage, one car brand isn’t even accepting orders. At the same time, the country is suffering from record-high energy prices and is a top country for energy dependence on Russia with its pants down, and so on.
Yes, the euro’s exchange rate specifically reflects Germany’s problems, of course, as part of Europe. Smaller countries like Finland can operate much more nimbly. Whether they do, of course, is another matter. Finland’s employment rate, for example, is dismal, and this is now becoming concrete as there isn’t enough money to distribute to everyone when there aren’t enough payers.
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### Author:  [@Enkeksi](https://forum.inderes.com/u/Enkeksi)
#### Post date: [May 4, 2022, 6:18am UTC](https://forum.inderes.com/t/porssien-suunta-osa-2/12591/5479 "2022-05-04T06:18:39Z")
This is a pretty essential part of Finland’s competitiveness, and since you’re always linking clever articles here, a “German job market for dummies and whether an even redder chancellor has an impact on it” would be nice!
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### Author:  [@Verneri\_Pulkkinen](https://forum.inderes.com/u/Verneri_Pulkkinen)
#### Post date: [May 4, 2022, 6:27am UTC](https://forum.inderes.com/t/porssien-suunta-osa-2/12591/5480 "2022-05-04T06:27:18Z")
> [@Expaco\_b](#):
>
> Wait, can you clarify why Germany would be doing particularly well right now?
>
> The country is an export industry nation, and exports are struggling right now, e.g., due to component shortages, one car brand isn’t even taking orders. At the same time, the country is suffering from record-high energy costs and is a top country for energy dependence on Russia with its pants down, etc., etc.
>
> Yes, the euro’s exchange rate specifically reflects Germany’s problems, of course, as part of Europe. Smaller countries like Finland can act much more agilely. Whether they do is, of course, another matter. Finland’s employment rate, for example, is dismal, and this is now becoming concrete as there isn’t enough money to distribute to everyone when there aren’t enough payers.
I should have specified that this was the case at least before the current energy crisis and component shortage. 😃
Though this situation also well illustrates the weakness of the German model (export-driven): as soon as the world stumbles and BMWs aren’t selling, the economy is in trouble.
Behind this is a very high-level idea that the economic area’s engine should be a driver of demand, not an absorber of demand. Just as the United States is the “spender of last resort” for the global economy, which is why it is relatively immune to many fluctuations in the global economy.
> [@Enkeksi](#):
>
> This is a pretty essential part of Finland’s competitiveness, and since you always link smart articles here, some “German labor market for dummies and whether an even redder chancellor has an impact on this” would be nice!
Regarding Germany, economist Michael Pettis has had good writings for years on the country’s current account imbalance (super surplus) and how it reflects on its domestic consumption and, on the other hand, elsewhere.
I recommend his and his friend’s recent book, Trade Wars are Class Wars, where, among other things, Germany’s situation is explained very understandably.
In short: Germany’s economy was in a really bad state in the 90s and was practically uncompetitive. The country implemented massive Hartz reforms, which curbed wage growth. After decades of this, we are in a situation where domestic demand is weak because a larger slice of the pie goes to export-profit-making companies. The current account is in a super surplus, and Germans invest their accumulated savings with poor success, such as in Southern Europe.
Within the eurozone, the problem has been that if every country doesn’t discipline households in the same way as Germany, they fall behind in competition, and the alternative is rising unemployment or indebtedness to Germany. The latter is easier, and voilà, the euro crisis and the problems of the eurozone. 😃
This is quite old, but it should serve its purpose because Pettis’s arguments have been relatively consistent for years. Which indicates that they work when they don’t need much modification. 😃
> **[Page not Found | Carnegie Endowment for International Peace](https://carnegieendowment.org/chinafinancialmarkets/51899)**
>
> Carnegie Endowment for International Peace
Addition: or for example, this tweet thread [https://twitter.com/michaelxpettis/status/1475437492199469058](https://twitter.com/michaelxpettis/status/1475437492199469058)
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### Author:  [@Tunturisusi](https://forum.inderes.com/u/Tunturisusi)
#### Post date: [May 4, 2022, 6:28am UTC](https://forum.inderes.com/t/porssien-suunta-osa-2/12591/5481 "2022-05-04T06:28:18Z")
> **[World's Top Exporters and Importers - World Options — World Options - Shipping](https://www.worldoptions.com/uk/news/worlds-top-exporters-and-importers/)**
>
> Discover the top exporters and importers from around the world with our informative article on the latest trends and statistics in global trade
It seems imports are greater than exports in Europe. There are no other export giants in Europe besides Germany, where export revenues significantly exceed imports.
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### Author:  [@Enkeksi](https://forum.inderes.com/u/Enkeksi)
#### Post date: [May 4, 2022, 6:31am UTC](https://forum.inderes.com/t/porssien-suunta-osa-2/12591/5482 "2022-05-04T06:31:04Z")
## Tweet
See new Tweets
# Discussion
[\n \n](https://twitter.com/Schuldensuehner)\n\n[\nHolger Zschaepitz\n](https://twitter.com/Schuldensuehner)\n\n[\n@Schuldensuehner\n](https://twitter.com/Schuldensuehner)\n\nGood Morning from [#Germany](https://twitter.com/hashtag/Germany?src=hashtag_click) where risk of price wage spiral is real & not just product of [#inflation](https://twitter.com/hashtag/inflation?src=hashtag_click) angst ingrained in German DNA. Last week’s IGM demand for 8.2% pay increase (for 12mths) for steel industry provided another reminder that German wage pressure index turned red hot\n\nTranslate Tweet\n\n[\n \n](https://twitter.com/Schuldensuehner/status/1521720248029917184/photo/1)\n\n[8:15 AM · May 4, 2022](https://twitter.com/Schuldensuehner/status/1521720248029917184)·[Twitter Web App](https://help.twitter.com/using-twitter/how-to-tweet#source-labels)\n\nAnd then AI immediately put this in front of me. That’s quite a wild starting point for negotiations.
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