Rising inflation and reports that it could go even higher are pushing people towards tradable instruments, and the stock market is a notable destination to consider. Promises of high returns and a reason to hedge tanking currencies because of inflation are a key influence, but what does it take to hack it in the stock market and will it hold after COVID.
There are two scenarios to contemplate, losing it all or making massive gains, in the long or short term. Random investments are a risk, so is any investment due to the nature of tradable assets—Investors should take note. Trading the crypto market on PrimeXBT is another avenue, with an Ethereum trading platform showing recent bullish runs that hit significant milestones unseen before. However, apart from the pandemic, there are other factors to consider before going all out for any investment. The Federal Reserve planned interest hike is an example.
Markets Preview: The Federal Reserve Planned Interest Hike
Expectations of a Fed rate hike is a situation markets must always contemplate, with bond sales also expected to take a hit to stem inflation in the first quarter of 2022. Investors on PrimeXBT will probably feel the hit at some point. Indications show that early March 2022 is the probable date for the hikes, meaning a bond rally sooner than that date.
Interest rates have historically stayed low to foster lending and safeguard key pillars of the economy. However, the near-full labor market and the rising inflation are too much to bear and watch from the government’s point of view. Expectations are that markets should contemplate one percent to 1.25 percent rises before the end of 2022. The Federal Reserve is taking a cautious approach, however—a balance between protecting the economy and preventing a surge in consumer prices in both the short and long terms.
How Will The Hike Affect The Markets?
The first week of January witnessed a monumental scenario in the markets, the S&P hit a high never seen before, adding to its 2021 impressive close. However, this was short-lived, as, on January 18, it tanked. An interest hike is massive to protect the economy, but it derails smaller businesses from growing because of the inability to handle growing interests payable to lenders. Less growth affects the markets, with the notable drop of eight percent in the S&P 500 later in January a warning before the inevitable hike.
Benchmarks dropping points earned after a rally are an alarm to investors to take action. The markets are seeing a massive dump of bonds to anticipate the restrictions the Federal Reserve will probably put in place to tame inflation.
COVID-19 and Its Effect on the Markets
The markets are reeling, a notable bullish run after the end of restrictions in 2021 confirms this fact. However, the Omicron variant is setting the pace for future variants, which will also have a significant impact on tradable assets. The most significant impact of COVID is its hold on workers, which is a turn-off for the massive economic gains after restrictions.
A struggling labor market is not good news to people wanting to have a share of tradable assets. Fears of new lockdowns or variants are dampening investor mood, but there is some good news to look forward to as the markets open in 2022 all over the world to anticipate the post-COVID world.
Does the Post COVID-19 Market Outlook Look Good?
Many negatives stand out currently, stemming from 2021 and well into 2022. COVID-19 stands out, as it affects other issues to contemplate going into 2022 and beyond as the pandemic eases. However, notable picks by the S&P 500 in 2021 and other indices that are an outlier in the whole COVID-19 debacle are reasons to be confident.
Beyond COVID-19, there is a lifeline for investors, inflation will ease, and the central banks will take appropriate action. However, it is not yet clear when that time will come, but indications are there that it will be soon.
