If you haven't bothered following markets or the news this month and happened to look to see where the major assets were trading as the week drew to a close, you could come to the conclusion that March had been something of an uneventful time in financial markets so far.
Of course, it’s been anything but that and pretty much all asset classes have experienced wild swings. It does highlight that there have been so many more unknowns in all markets at the moment, which I am sure was wrong-footing many traders.
For example, oil started the month at $95 a barrel, hit $125—and then this week was back to $95 again, all in the space of less than two weeks. It does feel as if the massive volatility seen in the likes of oil and gold may have faded for now and traders may be more cautious about chasing momentum to the upside, given that these gains can be given up very quickly.
Most people were awaiting the latest interest rate decision from the US central bank, the Federal Reserve, this past week, but a few hours ahead of this, news broke of a potential peace deal edging closer between Ukraine and Russia. This did see a surge in stock indices, but as the Russian attack has continued, perhaps investors may be a little wary of how close any peace might actually be.
When the Fed decision to raise interest rates was announced—perhaps the most accurately forecasted rate rise in recent history—markets seemed confused. As is often the case here, the initial move after big announcements—the non-farm payrolls is another good example—proved to be the wrong one. Stock indices such as the S&P sold off after the decision, only to perform a 180 degree turn and more after 30 minutes, to close at their best levels for a couple of weeks.
But does this really change much? We’ve had a couple of good days in US stock markets, but for now at least, rallies continue to run into selling pressure, so it was perhaps a bit early to think we were out of the woods just yet.
And Thursday saw the Fed reckon inflation would be around 4% by the end of the year. Only back in December they saw this at 2.7%, so in around three months they have had to jack their forecast up by 50%. Perhaps they are just as confused as the rest of us as to what the remainder of 2022 will mean for the global economy.