Top 3 Events Shaking Wall Street Right Now

Wall Street’s experts warn of a recession and more trouble for stocks ahead. Among the rationale: the inflation rate is high and still rising, rising supply-chain bottlenecks, and the rising bond yields weighed on growth stocks. Here’s our pick of the top three events shaking Wall Street right now.

Russia-Ukraine War

The global stock markets usually rebound from disaster and war, and they’re likely to do so again. However, Russia’s war on Ukraine raises risks. The war has already afflicted commodity markets, stocks, and bonds worldwide. Since the invasion, the U.S. stocks have stumbled, shifting the value of exchange-traded funds and mutual funds into millions of retirement accounts.

Short-term effects

Where the war is heading isn’t clear, but the short-term effects are simple: equities will keep falling, and the energy prices will keep rising. However, not all stocks have been affected. The rising gas and oil prices have strengthened the S&P 500’s energy sector. This came even after the overall index, which often is the proxy for the whole stock market, has tumbled by 8.8 per cent (Sommer, 2022).

Most American investors have almost $140 billion invested in commodities E.T.F.s, mostly those targeting the energy sector, such as the $35 billion Energy Select SPDR Fund, which has seen a rise in returns (Sommer, 2022). The Ukraine invasion is likely to inflict and whipsaw the market even further. Long-haul investors with diversified portfolios of high-quality bonds and stocks will probably ride out the crisis.

Is the crypto market affected?

Due to the Ukraine war and the disruption resulting from oil prices, stocks are quite vulnerable. At the same time, the cryptocurrency market has continued with its fresh rebound. Some analysts suggest that the increased demand from Ukrainians and Russians has led to a new increase in prices.

The Central Bank

Investors have taken shelter in cash as the central bank fears turbulence across global markets. This is seen in the spike in cash holdings among investors from 5% in January to 5.3% in the following month (Steer, 2022). According to a survey by Bank of America, this marks the highest point since the initial days of the Covid-19 pandemic in May 2020. Mounting expectations that central banks like the United States Federal Reserve will have to aggressively tighten the monetary policy to rein in the sizzling inflation have shaken investor sentiment.

What’s the concern?

Traders are now concerned that the Fed will have to act quickly to reduce the high price growth that will affect the nation’s economic recovery, which could inflict risky assets. The Wall Street bank has advised customers to give cash a higher priority in their portfolios and advised a reduction in corporate bonds. Currently, investors are receiving almost no yields from the cash they invest in the U.S. money market funds, a vehicle with usually short-term assets and ultra-low risk. Should we see another interest rate selloff, the bond and equity prices could fall altogether as the Fed prepared to start raising interest rates to curb inflation. The big tech stocks like Apple, Microsoft, Nasdaq, and S& P 500 have been the hardest hit.

Covid-19 Pandemic

Wall Street is nervous as the media whips up fear over a new wave of Covid-19. Investors, afraid of more travel bans and lockdowns, have moved their funds into sectors that significantly leveraged from the previous waves. Stocks sank as the new wave detected in China was reportedly spreading worldwide.

Affected industries

Airline stocks are quickly being sold off, and the cryptocurrency market is expected to get caught up in the selling. Fearing more travel bans and lockdowns, investors are moving funds into sectors that largely leveraged from the previous waves, such as Peloton for home-exercise equipment and Zoom Communications for meetings. The shares of such companies will rise significantly.

Bottom line

Although some share prices sometimes take longer to recover, from history we know that shares eventually bounce back after a crisis. So, until we see a good reason, we expect investors’ portfolios to keep expanding.

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The Contentworks team