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Stock Markets

10/06/22, 12:35

Smiling Young Businessman

Badr Almajed

Tokyo Academy

Financial Analyst

Is the market drop over or it is the beginning?

as it is known that the global Economy is linked to the American economy and that any change occurs in the American economy correspond to the change in the Global economy since the American economy is a capitalist economy it is forced forced to enter to enter into the so-called business cycle.

The importance of the economic cycle for investors and traders in general lies in knowing the general trend of the financial markets. It is also called the business cycle, It is a group of changes that occur periodically in economic indicators such as unemployment, inflation and GDP. This cycle is found in the capitalist economy, which extends from (3-8) . It is difficult for governments, especially capitalism, to prevent economic cycles from occurring, but they have the ability to reduce the period of stagnation and depression and prolong the period of recovery and peak. Each cycle varies according to the economy’s ability to exit its various stages and move to the stage of prosperity and prosperity.

The economic cycle consists of four phases (recovery, peak, stagnation, and depression). The first and second phases (recovery and peak) begin with an increase in productivity and expansion, and then an increase in aggregate demand as a result of lower interest rates to their lowest levels, as the financial markets, in general, are in an upward direction and live in a period From the recovery and relaxation and the rise in the indicators of the financial markets, companies with good financial performance in the first and second phases make some kind of booms and create new peaks for us in their prices because the global economy directly helps this and at the same time the recovery of the markets helps prevent companies with a bad financial performance from slipping to the bottom.

At the end of the second stage (the peak), the US economy is heading towards inflation (the general rise in the price level), where interest rates fall and the economy pumps large amounts of cash that leads to an increase in aggregate demand. Meanwhile, the US administration, along with the Central Bank, is trying to confront hyperinflation through Monetary policy tools, the most famous of them (interest rates), and financial policy tools, the most famous of them (tax), the economy then moves to the stage of stagnation and depression, in which the economy witnesses a decline in growth, low productivity and expansion as a result of the inability of companies to withdraw loans due to the increase in interest rates.

In the third and fourth stages, the financial markets are in a sharp downward trend, and we also notice a sharp decline in the indicators of the financial markets in general. During this period, companies with good financial performance maintain a kind of relative stability. As for companies with poor financial performance, they will face major problems if the markets drop. With the bad performance of companies in such cases, the results will be disastrous and reflect negatively on stock prices doubly and create new bottoms for us.

At the present time of 2022, the American economy is between the peak and stagnation stage, specifically it is in the middle of the economic cycle, but with that lies the US administration’s fears of (stagflation), which is worse than stagnation on the economy in general and financial markets in particular, and determining whether Inflation was influential or not, attention should be paid to the most important economic indicators (unemployment rates) in the economic situation in which inflation exists. If unemployment rates are high, the US administration is on the side of the Central Bank, which is the main driver of financial markets and is primarily responsible for setting the pace for the American and even global economy.In this case it will deal seriously towards inflation because inflation results with higher growth rates and higher economic growth.

In the end, does the decline end there, or is it just the beginning? In light of the current circumstances and the general data of the American and global economy, the decline will be more severe on the American markets in particular, and the global markets in general.

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