Investors hoping that this week would shed more light on whether we are heading into a bear market will probably still be scratching their heads on Friday. Monday did not start well, with the S&P 500 index briefly plunging to its lowest level since June 2021.
This is quite the achievement given that it was barely three short weeks ago that the broader benchmark had moved out to fresh all-time highs once more. The size of the sell-off to start the week very briefly put the market in “correction” territory having dropped by 10% from its high.
Since then the market theme has been lots of noise, very little direction. Each day has seen some wild swings by normal standards but for now at least we have yet to see a sustainable recovery from those 7 month lows. It looks like investors are set to enter February still on the edge of their seats, trying to decide if this is a great buying opportunity - or just the first step in the next bear market.
Wednesday saw the latest announcement from the US central bank, the Federal Reserve. As was broadly expected, there was no change this time around but the prospect of a rate rise in March is now the favoured forecast by markets.
Of course this is all to try and keep a lid on inflation which looks set to be a much bigger problem this year than any central bankers thought at the beginning of 2021. Hardly helping the cost of the living crisis was the price of oil. Friday saw it yet again scrape out a fresh 7-year high as West Texas Crude moved through $88 a barrel.
It's perhaps not often we feel sorry for those who work at central banks and try to manage the economy, but this year it does not look as if that is going to be an easy task by any stretch.
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