US stocks had their worst day in two years this week as inflation fears bite. The S&P500 lost more than 4% midweek as investors fear a US recession is getting closer. Earnings reports from Target & Walmart stoked these fears as both stocks plunged lower. Fuel costs were up, wages were up, sales were up too, but profit was down! Is this a sign of things to come? Will companies find the inflationary landscape a difficult one to keep being profitable in? Time will tell, but for now investors are clearly worried that a deeper correction in stocks is ahead. Will we see another leg lower in US stocks next week?

Other key events from the past week

Key events for the coming week

  • NZD: Interest rate decision, May 25: The short term interest rate markets are pricing in a 90% chance of a 50 bps rate hike. Will the RBNZ deliver? Will they start to worry about coming recession risks and will that even send the NZD lower despite a hike? It is going to be an interesting meeting!
  • Seasonal trades: Silver surfing? Will stagflationary fears send silver surging higher in line with its seasonals?
  • USD: Core PCE, May 27: Inflation, inflation, inflation: This is what’s driving the Fed’s aggressive policy. Jerome Powell said on Tuesday that the central bank won’t hesitate to raise rates above neutral if needed. Will inflation pressure on Friday keep the pressure on the Fed to raise rates?

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