Indicator activated only five times since 2000 lights up alert for actions

An indicator that has soared only five times since 2000 has come to be seen as a warning sign for the stock market. According to MarketWatch, which does not identify the indicator by name in the report, the current scenario is similar to previous moments of decline and, therefore, the market appears more vulnerable.

According to the report, the signal has been activated five times since 2000. When comparing the current situation with falls recorded in previous periods, the text concludes that the market is more exposed to a downward movement, which attracts the attention of those who have part of their equity in variable income.

The main reason given is inflation. With prices still high, central banks have less room to cut interest rates, and this limitation reduces their ability to support asset prices, according to the publication.

A macro research firm, also unnamed, recommends reducing exposure to stocks and increasing holdings in bonds and cash. The recommendation appears as the main practical conclusion of the survey, but the report does not detail the methodology used by the house.

The central question, therefore, is whether stocks can maintain their prices in an environment in which inflation prevents central banks from easing monetary policy. This combination is what gives weight to the warning, as interest rates are one of the main references for asset pricing.

What changes for the investor

For those who invest in the stock market, Nasdaq or interest, the report's message is one of caution given the risk described. In practice, monitoring inflation and central bank decisions gains importance, because these are the factors that, according to the text, block the path to interest cuts. Assets that are more sensitive to interest rates tend to react more intensely to this type of scenario, but the report does not go into detail about impacts by sector or index.

Automatically translated from Portuguese.