For people paying attention to financial markets, a week is a long time and a lot can change. Last week, markets were convulsing after the Federal Reserve indicated that it would start raising interest rates later this year.
After a week of volatility, Wall Street started to rally on Monday. Investors were still digesting the implications of the Fed’s move. Technology stocks led the rally, as the Nasdaq managed to avoid its worst January ever.
Although stocks have managed to recover from January’s sell-off, it’s still possible the damage it caused will be significant. Although it’s difficult to predict the next move in the market, Lauren Hill said that active management has an advantage in terms of distinguishing between stocks and investments.
With Feds Getting Ready To Slay the Beast of Inflation, Many Are Asking How Much Are They Going to Rise? How Quickly?
Brian Sozzi and Alexandra Semenova discussed the significant changes in the forecast for the next couple of hikes from Wall Street. Whether the central bank decides to play small ball or get aggressive, it’s going to leave investors with a lot of unanswered questions.
With all of that in mind, here are three asset classes that are most at risk:
1. Stocks
Sam Stovall of CFRA Research said that January is a good indicator of the year’s temperature. Stovall noted that the January barometer and the Santa Claus Rally can provide important clues about the direction of the US economy in the coming year.
This year, the Santa Claus Rally failed to materialize. Instead of heading into a positive year, the S&P 500 ended the year with a 9.6% decline. Although the market’s recent decline may end, it’s unlikely to be the end of the decline this year.
2. Cryptocurrencies
Cryptocurrency’s recent decline highlights the increasing correlation between cryptocurrencies and traditional financial market factors. In a report released over the weekend, David Hollerith of Yahoo Finance revealed that a new cryptocurrency protocol known as Tornado Cash was used in a major hack on Ethereum. It’s a reminder that during volatile periods, people tend to conduct illicit activities.
Although blockchain technology’s development will provide a secular tailwind to the valuations of digital assets, they will still face headwinds from central bank monetary tightening.
3. Housing Market
The housing market’s importance to the economy is becoming more significant as inflation rises. The Economist explained that higher interest rates are expected to slow down the recovery in the real economy. It’s caused by the excess amount of money that was taken out by homeowners during the dot-com boom.
The housing market has been mixed, with 30-year mortgage rates still near their highest levels in almost two years. However, Janna Herron of Yahoo Finance noted that the hot housing market is pushing up rental prices across the country.
Despite the mixed signals, 30-year mortgage rates are still near their highest levels in almost two years. Hot housing markets are boosting rental prices across the country, according to Janna Herron of Yahoo Finance. During an interview, Jon Ziglar, the CEO of RentPath, said that many people are leaving the housing market due to the increasing prices. Buyers beware, indeed.