27 June 2022
Market turmoil - Martin Hawes
Buying in gloom is the right thing to do, but it requires courage to buy in spite of all the negative noise. Investors are fearful at these times, and in a bid to ally those fears, it is worth considering what is driving the markets. There are three relatively short-term issues frightening the markets, and two longer-term worries. The three shorter-term worries are:
1. Inflation and the way interest rates are expected to rise to tame inflation. This is probably the share markets’ greatest worry at the moment and may take a few months to resolve. In particular, the market needs to have a bit more certainty on the level at which interest rates will settle, and the speed with which they will get there.
2. War in Ukraine. Markets are less concerned by this, provided the war does not escalate or spread. A truce or cessation would be good for markets, but it is not a prerequisite for the return of market rises.
3. Pandemic. There are still areas of the world (especially in China) that have tough COVID-19 restrictions, which certainly hold back economic recovery. Lockdowns, quarantines and mass testing have affected supply chains and consumption. A lifting of these kinds of restrictions would be helpful for markets.