Market Volatility Stress

2022 is off to a rough start for many sectors of US equities with tech leading the way with some of the biggest losses. There are a few factors that could be contributing to the selloff that started last week. The fed’s decision to increase rates from their early pandemic lows, to the disappointing job numbers in December. We can also not forget to discount the fact that the beginning of the year is also typically a time where we see many fund managers make changes to portfolios for the new trading year. The most important thing to remember through all of these more bleak trading days is that this is not abnormal.

Market selloffs are a part of the ever continuous market cycle. As the old saying goes, “What goes up must come down” and part of this also rings true when it comes to equity markets competing with bond yields. As we see bond yields rise, we typically see equity prices fall, and we can see that direct correlation right now as we see US treasury yields rising again. This does not mean though that equities can’t gain back their previous ground. Remember that the historically low fed rates we have seen since the beginning of the pandemic were never meant to be permanent, and that the increases we are set to see in 2022 have been necessary for some time. We could see equities respond positively as rates and inflation head back in the direction before the pandemic in early 2020.

If you are still concerned about market volatility, or aren’t sure about how your portfolio is currently allocated towards equity or fixed income investments, schedule a meeting with one of our financial professionals to review your accounts and answer any questions you have.