Global investors have many risks and vulnerabilities to consider as the second year of the Covid-19 pandemic draws to a close. Global economic confidence has been shaken with the sudden emergence, and rapid spread of the Omicron variant as nations reimpose restrictions and virologists issue warnings about the strain’s severity and consequences. Existing immunizations against the bacterium Omicron have been questioned, adding uncertainty. Consider the following events that will influence investor sentiment and trading methods.
The Virus & FED Is Causing Uncertainty
Because of the virus’s comeback, there are growing fears that inflation may skyrocket dramatically. A longer-lasting epidemic would create even more disruption to supply chains and worsen labour shortages, resulting in higher pricing for consumers. Lockdowns that are renewed, on the other hand, have the potential to damage the recovery. To make things worse, the hawkish move from some of the world’s most important central banks is the one that investors are most concerned about. Last week, the Federal Reserve’s decision to accelerate the tapering of its asset purchases and suggest that the notion of a minimum of three interest rate rises for 2022 has exacerbated the prospect of excessive policy tightening, which is particularly dangerous for emerging markets and other emerging economies.
Are Things Really As Bad As They Seem?
All of these concerns are exacerbated because global stock markets are overvalued. According to Bloomberg statistics, the value of global shares has quadrupled to US$120 trillion since March 2020. However, one thing that has been evident since the virus hit is how radically economic circumstances and market mood may diverge. Making accurate macroeconomic forecasts has proven to be much simpler than anticipating how markets will respond to significant financial and policy events.
No one could have predicted that the S&P 500 would surpass its end-of-2019 level by late July 2020, during the second wave of infections in the United States, months before a breakthrough in the race to develop an effective vaccine, and during the world economy’s worst recession since the Great Depression? By the same token, if investors gazed into their crystal balls at the start of 2021 and forecasted that US inflation would surge to about 7% by the end of the year, would any of them be taken seriously if they predicted that the 10-year US Treasury yield would fall to only 1.4 percent by Christmas?
There is nothing new about the gap between economic facts and market sentiment. Yet, the unusual shock of the epidemic and the growing dominance of central banks over markets have made it twice, if not triple, difficult for investors to accurately forecast asset price performance (especially in light of Russia’s invasion of Ukraine).
Bright Future For Crypto Despite War
Cryptocurrencies increased recently, reversing previous losses, as traders seemed to shrug off the Russia-Ukraine situation. According to Coin Metrics, Bitcoin increased by 1.7 percent to $38,262.21. Ether rose around 0.2 percent to trade at approximately $2,631.50. Earlier in the day, Bitcoin fell more than 8 percent to $34,702.18, the lowest level in a month and below a critical support level, according to Katie Stockton of Fairlead Strategies. Additionally, she said that the down move might exhaust itself by the end of the day, paving the way for two or more weeks of stability. If you are thinking of investing in crypto, make sure you are buying it from a reputable company like Altalix!