After rallying in March, equity markets retreated last week. Investors expressed concern over the Federal Reserve (Fed) meeting minutes released on Wednesday, which communicated plans to reduce their balance sheet (alongside raising interest rates throughout the year).
Risk assets, in general, advanced last week, building upon a big bounce upward the week prior. The S&P 500, a proxy for US large-cap stocks, gained 1.8 percent for the week and the MSCI ACWI, a proxy for global large-cap stocks, advanced 1.2 percent.
In a week full of headlines, investors found more positive news than negative and equity markets responded by rallying across the board last week.
The conflict in Ukraine has entered its third week and the destruction it has caused to the country and citizens has only intensified. The United Nations now estimates that 2.7 million people have fled the country since the invasion.
The situation in Ukraine deteriorated rapidly this past week, moving quickly from a tense situation into a full-fledged Russian invasion that has put Ukraine’s 44 million people in jeopardy and shaken European security.
The situation in Ukraine continued to take center stage last week, crowding out most other financial news. US President Joe Biden, citing US intelligence agency information, stated that he believes Russia will attack Ukraine in the coming days.
Two all-too-familiar stories dominated the financial news cycle last week: inflation and the situation in Ukraine. The two rattled investor confidence and contributed to the S&P 500 index, a proxy of large-cap US stocks, dropping 1.8 percent for the week.
Risk assets, in general, fell again last week as concerns over inflation, Federal Reserve rate hikes, the omicron variant, and geopolitical tension weighed on investors.
A new year is underway, and it started off in a relatively inauspicious way for market participants. First the positive news – the US unemployment rate fell to below four percent in December and employee wages grew, as well.
The past week was filled with both ups and downs for risk assets, as markets struggled to digest news related to the Covid-19 omicron variant, surging inflation, and the latest Federal Reserve (Fed) messaging.
