Under the expectation of aggressive interest rate increases brought about by inflation, US stocks have accelerated their decline, with technology stocks and the retail industry getting worse one by one.

On Monday, according to media reportsThe MSCI information technology index has fallen 20% so far this year, the worst start to the year since 2002.MSCI Global Retail IndexIncluding Target, Zalando SE and Amazon.Com IncIt has seen negative growth for the first time since 2008, down about 29% so far this year, worse than technology stocks.

Us companies are facing a wide range of challenges, with technology stocks shuddering inflation fears taking a huge toll on retailers and squeezing their profits.Warnings from giants such as Target, Walmart Inc and Microsoft Corp shocked investors, with many analysts downgrading earnings forecasts for various industries and saying "this may not be the last warning from business giants".

For example, Target's profit warning on may 18th sent its shares down 25%, the biggest one-day drop since the black Monday crash in 1987. To make matters worse, just three weeks later, the US retail giant cut its profit outlook again, sparking fears of a rapidly deteriorating consumer environment.

Several clothing retailers across the US retail industry, including Abercrombie & Fitch,American Eagle Outfitters and Gap, have also warned of more misfortunes after the worst earnings season.

Microsoft Corp warned that a stronger dollar was undermining its profits and that second-quarter revenue would fall by $4.6 billion due to foreign exchange, with revenue and earnings guidance falling short of analysts' expectations. The appreciation of the US dollar will widely affect US technology companies, pharmaceutical companies and manufacturers with larger export markets that sell medical products in the international market.

This is just the beginning of the sell-off, far from over.

As US inflation continues to rise and the Fed's hawkish sentiment grows, corporate profits are under pressure and valuations are still too high.

Last week, the S & P 500 was trading at 17.7 times expected 12-month earnings, down from 21.5 times at the end of last year, according to FactSet, but the current price-to-earnings ratio is roughly in line with the 10-year average, suggesting that many investors believe stocks are still not cheap.

At the same time, the overall profit expectations of large American companies have been gradually falling. According to FactSet, analysts currently expectSecond-quarter profits of companies in the s & p 500 will rise 4%, down from the 6.6% expected on April 22nd. It also reduced the forecast for profit growth in the third quarter from 11.4% to 10.6%, and the forecast for profit growth in the fourth quarter from 10.9% to 10.1%.

John Zolidis, founder of Quo Vadis Capital, points out that in the usual recession cycle, there are several rounds of interest rate cuts before the stock market bottoms out. Unless the inflation data reverses, the Fed takes a less tough attitude.Otherwise, the present is closer to the beginning of the pain than to the end.

In the face of inflationary inflation, American consumer confidence has also collapsed. Consumer confidence at the University of Michigan hit an all-time low in June, a sign of declining economic growth. Pessimism pushed stocks lower further, with the S & P 500 posting its biggest two-week decline since March 2020.

Dimon, the boss of Universe, warned that an "economic storm" was coming and advised investors to be prepared.

Michel Keusch, investment manager at Bellevue Asset Management, said:

We have been vigilant since Walmart Inc and Target's warning. Since then, we have seen warnings from many retailers, further exacerbating widespread pessimism.

Morgan Stanley's chief US strategist Michael Wilson pointed out:

The bear market is not over, corporate profits will continue to decline, and we don't think the sell-off is over yet.

The hawkish Fed and falling earnings expectations will pull the S & P 500 to 3400 in mid-to-late August, down 13% from Friday's close.

Not only the United States, but the whole world is facing challenges.

With the sharp rise in inflation and the cost of living, stock markets in other countries are not immune. In the UK, where electricity bills have soared and consumer confidence has fallen, companies such as Next Plc, M & S and online fashion retailer Asos Plc have suffered a sharp sell-off.

In Asia, the retail industry faces a similar fate, with the Bloomberg Asia Pacific retail index down 20% this year and Australian supermarket giant Wesfarmers down 26%.

To be sure, not everyone is tightening their wallets, some consumers are spending unabated, airline bookings are surging and luxury sales remain strong.

Take history as a mirror: retail indices tend to fall during recessions.

Swetha Ramachandran, a portfolio manager at GAM Investments, believes that investors do not seem nervous enough. Historically, the MSCI global retail index fell in 2008, 2007, 2002 and 2000-all during recessions.