A Fragile Market To Kick-Off 2022
The stock market's start to 2022 has been fragile, as evidenced by the sell-off in several stocks. Last week, U.S. equities fell for the second week in a row, pushing the S&P 500 and Nasdaq down 2.2% and 4.8%, respectively. Some equities and sectors have fallen even faster.
- More than 220 publicly traded companies in the United States with market capitalizations over $10 billion are down at least 15% from their highs
- S&P 500 behemoths such as Walt Disney, Netflix, Salesforce, Estée Lauder and Adobe are among them
- Gains in most indices have been driven by a small number of companies in recent weeks
The Fed Ends The Party
The Federal Reserve has declared its intentions to halt its bond-buying stimulus program, with the first three interest rate hikes scheduled for later this year. Furthermore, the Fed has indicated that it will act quickly to reduce its $8 trillion balance sheet.
- Most index-leading stocks are now trading at a significant premium versus their historical valuation
- With indices at elevated levels, investors have come to ask themselves what is next for stocks as the Fed is raising interest rates
- Earning season could provide some support for markets if companies manage to display relatively strong earnings and sales growth
- However, supply chain issues and inflation-related cost increases might pressure businesses
- This might fail to provide the kick the market needs to reach higher
Please note that this article does not constitute investment advice in any form. This article is not a research report and is not intended to serve as the basis for any investment decision. All investments involve risk and the past performance of a security or financial product does not guarantee future returns. Investors have to conduct their own research before conducting any transaction. There is always the risk of losing parts or all of your money when you invest in securities or other financial products.