S&P/ASX 200 Index (ASX: XJO) investors hoping the benchmark index would shake off its four-day losing streak to end the week with a bang will be left wanting.
In morning trade on Friday, the ASX 200 is down 1.1%.
Barring a major intraday turnaround in investor sentiment (unlikely, but there's no harm in hoping), the index of top 200 stocks will have closed in the red all week.
Adding the other four days of losses to today's retrace, and the ASX 200 is now down 4.1% since last Friday's closing bell. Though the index is still up 6.3% over the past year.
Here's what's happening this week.
Why is the ASX 200 losing ground again today?
Aussie stocks are getting battered today by a range of global headwinds.
Those headwinds saw all the major European indexes closed deep in the red yesterday. And there were similarly large losses in US markets.
The S&P 500 Index (INDEXSP: .INX) closed down 1.6% overnight.
And US tech stocks had another tough day, with the Nasdaq Composite Index shedding 1.8%.
It's a similar story with most tech shares here in Australia, with the S&P/ASX 200 Information Technology Index (ASX: XIJ) down 2.2%. (The Info Tech Index remains up 22.5% over the past year.)
Which brings us to the first and stiffest of global headwinds hammering the markets this week.
Central banks across the developed world are gradually winning their battle with inflation.
Which is good news for global equities.
However, the much hoped for interest rate cuts markets had begun to price in for late 2023 and early 2024 increasingly appear to be further off than hoped.
Yesterday, the ASX 200 closed down 1.4%, despite the US Federal Reserve keeping interest rates on hold.
That was largely due to some hawkish comments from Fed chair Jerome Powell, indicating one more rate increase was likely in 2023. And, more concerningly for equity investors, he signalled that rates in the world's top economy were likely to stay higher for longer than most analysts have been forecasting.
Powell said the Fed was "prepared to raise rates further if appropriate". And he cautioned, "We intend to hold policy at a restrictive level until we're confident that inflation is moving down sustainably toward our objective."
Commenting on the slumping markets, Chris Gaffney, president of world markets at EverBank, said (quoted by Bloomberg):
A lot of investors had been second-guessing the Fed all along. They're committed to keeping inflation down and part of that, I think, is to keep rates higher for longer – and markets are finally coming to grips with that.
And it's not just the Fed pressuring global shares and the ASX 200 over interest rates this week.
There looks to be growing consensus that the European Central Bank (ECB), the Bank of England (BoE) and the Reserve Bank of Australia (RBA) may all keep interest rates higher for longer in order to ensure the inflation genie remains in its bottle.
Yesterday, the BoE opted to keep the UK's official cash rate at 5.25%. However, it was a tight vote, with four members voting to raise rates and five voting to hold tight.
And the BoE also sounded off on the higher for longer message. Not the mantra global or ASX 200 investors want to hear.
"Monetary policy will need to be sufficiently restrictive for sufficiently long to return inflation to the 2 per cent target sustainably in the medium term," the central bank stated.
What else is pressuring the ASX 200?
It's not just interest rate woes sending the ASX 200 slumping today.
There are three significant events unfolding in the US that could rattle the world's biggest economy.
We have the unprecedented autoworkers strike, which could impact global supply lines just as they're in the nascent stages of their pandemic recovery.
We have the looming US federal government shutdown, which could see thousands of federal employees and service providers go without pay.
And we have the student loan deferment program getting axed.
Student loan repayments?
Including federal and private loans, there is a whopping US$1.75 trillion in total student loan debt outstanding in the US, according to Forbes.
Repayments were put on hold for three years in the wake of the pandemic. But that's about to end.
Commenting on that impact, Bloomberg Economics' Anna Wong said, "Student loan forbearance had postponed the impact of rate hikes. Were it not for this policy, rate hikes would have slowed the economy already."
A big weekly retrace in the ASX 200 can open the door for some long-term bargain hunting opportunities.
Most of the damage this week isn't related to the business specifics of the companies listed on the index.
As history has shown again and again, these macro headwinds will fade in time, and fresh tailwinds will emerge.
And by then, some of the ASX 200 stocks getting hammered this week will be looking quite cheap at today's prices.