Even the casual observer of financial markets will probably have noticed the various headlines announcing that the S&P 500 is in an “official” bear market, with the broad US stock market index down by more than 20% for the year so far - and we are not even six months into 2022.
Last week saw stocks slip further again, with the S&P trading back to levels not seen since December 2020. It has been a brutal few months for many markets and last week also saw the US central bank, the Federal Reserve implement its most aggressive rate rise for decades.
But investors still seem to be worried that the various policymakers around the world are being outpaced by ever-rising inflation - the uncertainty about just how the cost of living will rise, coupled with just how high rates will need to go to try and combat this is fuelling the risk-off attitude we are experiencing in all sorts of assets.
Although dipping sharply over recent days, the US dollar remains a popular destination in these uncertain times- the US dollar index is up by more than 8% this year. Against currencies such as the Japanese yen, the greenback is trading at a 20-year high. Gold, the traditional inflation hedge and haven in times past, is broadly unchanged for 2022 and seems to have lost appeal as the default destination when panic stalks markets.
This all sounds pretty gloomy - and it is. It is quite challenging to find much in the way of positive economic news at the moment. But students of market psychology would point out that when pessimism seems to be at an extreme, this can often be the time that markets surprise many of us.
There does come the point when the most recent bout of selling is over, and investors feel further falls are imminent. But, there is no one left to sell. This is an oversimplification, of course. Do not be surprised if we see a comeback for global stock markets in the weeks ahead. For now, that wouldn’t be enough to change from a bear to a bull market - but it could give everyone some respite from a constant sea of red on their screens.
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