The start of 2022 was promising!
The lockdown had led to a drop in global GDP and everyone was geared up to see a market recovery. All predictions were that the market is going to gain momentum after the two years of pandemic.
With the emerging markets seeing a good demand and rise in individual and corporate spending, the predictions for 2022 were mostly positive. Even with the understanding that the market will need correction, January saw a jump in the number of investors along with a demand for certain sectors and investments.
The pandemic was moving on to an endemic stage and countries had started to open borders. The industries highly affected by the pandemic were all set to open their doors to make up for the losses suffered. But, January eventually turned into a volatile month with dips and highs, forecasting a shadow onto February.
February has been even more volatile and has kept the investors on their toes. Many factors have affected this, especially the Russia-Ukraine crisis. March is also looking to be a wait and watch month for the investors.
Reasons For March To Be A Low Month
Russia-Ukraine Crisis: The outcome of the current tension on the markets is one of the main reasons for one to stay back and wait. Not only the impact on the commodities market, but also the eventual effects on the Russian business and neighbouring European countries could result in creating a huge strain on the markets. However, a peace deal may lead to a positive impact.
Federal Reserve Outcome: The upcoming meeting for the Federal Reserve in mid March is to review the interest rates increase. With the rising inflation, the Federal Reserve wants to hike the borrowing rate and try to encourage the saving mentality. The market has factored a hike of 25 basis point but if the Federal Reserve announces a higher increase in interest rate, the market will definitely see an impact.
Crude Oil Rate: The crude prices crossed $100 per barrel for the first time since 2014 before coming back down to $96 this week, the markets looked bleak. The impact of increased fuel prices on an already high inflation will put a strain on market performance. The oil price does not only affect the market but also major industries and individuals.
Like the airline industry which has seen the worst couple of years with the pandemic will struggle to cover its losses if the price of oil does not stabilize.
Year-End Rebalancing: With the financial year ending, the impact of all these factors will play heavily on the index heavy weights and thus in turn impact the index overall. The buyers looking to book in the profits will also result in a volatile market.
As An Investor What To Look For?
The best thing to do right now is to keep oneself updated on the conclusion of the Federal Reserve meeting. Also follow the response by the various countries in regards to the Russian invasion of Ukraine, as these will play the biggest role in swaying the market one way or another.