Buckle up! There could be more market volatility ahead

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Stock markets had a woeful January performance wise and February hasn't brought much by way of a turnaround. The actions of Central Banks against the backdrop of soaring inflation are driving much of the losses. With multiple interest hikes in prospect, there could be more selling to come.

If the analogy was real, investors would have had white knuckles by the end of January.

"If Anchorman Ron Burgundy was reporting on the market action since the beginning of the year, he would surely sum it up with his phrase"Well, that escalated quickly!".In short, the topic that's likely going to dominate economic and market commentary for much of this year - inflation, or to put it more plainly, the rising cost of living.

To put it another way, the market is not going to be factored into the Fed's decision making and investors can have as many tantrums as they like.Stocks in the technology sector, those that performed incredibly strongly throughout the pandemic, have borne the brunt of the selling. "In simple terms we can see the interest rate sensitive and very highly valued frothy end of the market is suffering," he explained.By the end of the month, the S&P 500 - a broad index of the top 500 stocks in the US - had suffered a bigger drawdown in 2022 than it had in all of 2021.

"It is becoming increasingly evident that not only does sentiment remain fragile, but earnings misses are being severely punished," he added."There was no bounce at all, and the stock closed on the low of the day. This point is important as it points not to a 'blip' in the earnings but a fundamental re-rating of the stock price," he explained.

 

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