Inflation and monetary tightening.
The Federal Reserve has been at the top of investment market minds lately. Market volatility has increased with the inflation numbers and expectations that the Fed will need to act more strongly to combat rising prices. Translation? Higher interest rates, less money supply, and a sped-up timeframe in which they aim to get there. None of this was welcome news to markets as investors seemed to adjust their portfolios to address the recent accelerated Fed tightening.
Growth to value rotation.
The adjustments to portfolios and rotation in equity markets has been stark, with growth and speculative companies, including cryptocurrencies, bearing the brunt of the recent selloff. More traditional value type and energy sector equities held up relatively well. This rotation is likely to continue for the time being. In my opinion, the bulk of the portfolio rejiggering in response to the Fed has already occurred. The market seems to be oversold, leading to wild swings in both directions. The great tug of war is likely to remain for now, with volatility starting to lessen in the coming weeks.
The prospect for a large-scale Russian incursion into Ukraine is truly a wild card. It is hard to determine how impactful such a development would be on the investment markets. It certainly would not be ignored. The magnitude of market swings is anyone’s guess, but volatility would certainly increase should Russia decide to invade the country.