Supply Chain Issues Easing, Stocks Fall Anyway

The stock market is staying stubbornly inconsistent despite signs that the supply chain could be stabilizing. Could this mean inflation will abate soon? Menawhile, the EU passes sweeping crypto regulations.

Inflation, supply chain issues, and gas prices might all be falling at the end of the week. That doesn’t mean the stock market is feeling optimistic, though. Investors woke up Friday to see the S&P 500 falling to start the year’s second half after the index’s worst first half since 1970. The index rose slightly later in the morning, shaking some early losses, but remained choppy.

Stock Market

The Nasdaq and Dow Jones both stayed inconsistent throughout Friday morning, trading up and down on investor concerns over a looming recession. Many economists now think the Fed did too little, too late, to curtail rampant inflation. That inflationary pressure is pushing US consumers to slow their spending, which could result in a stagnant economy. The only upside to a slower economy is that lower demand might help inflation solve itself as retailers slash prices to move overstocked inventories.

Read More: Check out the latest Mind Your Dollars stock and financial news.

Meanwhile, the EU has agreed to massive legislation that could help bring cryptocurrency under the banner of regulation that applies to other financial markets. This could be good news for crypto as the industry continues to collapse amid a historic sell-off that has crumpled some firms, like Three Arrows Capital. Simply put, things can’t get worse for crypto investors, so maybe they’ll start getting better with regulations in place.

Stock Market Stays Choppy

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Adobe Stock

No one can decide on the direction of the market these days. Bears are frustrated to see some stocks stubbornly holding their ground amid inflation and supply chain disruptions. Bulls are constantly stymied in this market, though, as sure-thing investments like Tesla and Netflix aren’t so sure these days. Can this pattern resolve itself without a recession, or is the US lurching toward another economic downturn?

The S&P 500 has lost 20% of its value since the year started. The Dow Jones has slipped 15.3%, its worst first-half performance since 1963. Meanwhile, the brutal sell-off in the tech sector has hammered the Nasdaq, which is comprised mainly of high-growth tech companies. The Nasdaq has lost a stomach-churning 30% since the start of the year, its worst six-month performance ever. 

“Inflation right now is on the minds of everyone, whether it’s a consumer, corporation, and policy makers. But after that, it’s really earnings,” says Zephyr market strategist Ryan Nauman. “So far, earnings estimates … haven’t come down at all. Right now, a recession isn’t priced into a future earnings. And I think that’s going to happen. We could see some pickup in volatility or some more sell-offs once we start getting into earnings season and to more downgrades,” Nauman goes on. 

Light at the End of the Tunnel

Inflation Concept

Things might start getting better soon, though. Some experts see signs that the supply chain constraints that have complicated global commerce could be abating soon. “June’s surveys of five of the 12 district Federal Reserve Banks strongly suggest that supply-chain disruptions have eased significantly in recent months,“ writes Ed Yardeni of Yardeni Research.

“The question is whether the drops in regional indexes tracking unfilled orders and delivery times during the first half of this year reflect more ample supplies or diminishing demand,” Yardeni explains. These faster delivery times could indicate that the fundamental pressures underscoring the global supply chain in 2022 could be abating. If this is the case, it could be the catalyst to see inflation drop, as shipping and labor costs stabilize to levels closer to those seen in 2019. 

Yardeni also notes that if the backlogs in the shipping industry are clearing up because of falling demand, the laws of economics hold that the price of these goods should fall, too. So far, that hasn’t happened. Perhaps retailers are stubbornly holding onto higher prices to try to recoup some costs, but this strategy won’t work for long. Sooner or later, prices have to come down, which could give US consumers a break from persistent inflation.

EU Plans to Regulate Crypto

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The long arm of the law is coming for the Crypto Wild West, and many investors are pleased to see it. The EU has agreed to sweeping legislation that will give member nations greater control over the whipsaw crypto industry, providing protection for investors and exchange platforms alike. This legislation has been in the works for some time, and some crypto enthusiasts say it goes against the core tenants of decentralized currency.

“Today, we put order in the Wild West of crypto assets and set clear rules for a harmonized market that will provide legal certainty for crypto asset issuers, guarantee equal rights for service providers and ensure high standards for consumers and investors,” stated Stefan Berger, an EU lawmaker who led negotiations for the European Parliament.

The new regulation doesn’t limit crypto mining, the controversial and energy-intensive process by which many crypto tokens are minted. Some lawmakers hoped to stop this practice in Europe to prevent further pollution but were unable to come to an agreement with the larger legislative body.

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