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“The unease seeping across financial markets is fast turning into panic as the fear factor over conflict in Ukraine intensifies while the spectre of soaring inflation looms ever larger. The FTSE 100 sank deeper into the red with losses intensifying after Wall Street opened to yet another slide. Once again tech stocks are taking the biggest tumble on indices with chip maker NVIDIA Corporation (NASDAQ:NVDA), Tesla Inc (NASDAQ:TSLA) and Netflix Inc (NASDAQ:NFLX) among the biggest fallers on the S&P 500 which has entered correction territory today. Investors are bracing themselves for action following tough talk from the US Federal Reserve at a key meeting this week. There are increasing signals that it'll reign in stimulus and push up rates more rapidly, lowering the liquidity in financial markets which had led to exuberant valuations.
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Q4 2021 hedge fund letters, conferences and more
Baupost's Seth Klarman Suggests That The U.S. Could Be Uninvestable One Day
In his 2021 year-end letter, Baupost's Seth Klarman looked at the year in review and how COVID-19 swept through every part of our lives. He blamed much of the ills of the pandemic on those who choose not to get vaccinated while also expressing a dislike for the social division COVID-19 has caused. Q4 2021 Read More
Ukraine Crisis Could Upset Recovery
The rising threat being posed by Russia as talks have disintegrated is now adding to a loss of investor confidence across the board. As many parts of the world still grapple with the wrecking effect Omicron is having on economies, there are now worries that a conflict on the fringes of Europe could upset the longer term recovery.
The announcement testing requirements would be lifted for travellers to the UK didn't touch the sides of airline stocks, which have been caught in the downward spiral of stocks. The end of tests for double vaccinated arrivals had been trailed by the British government last week and so expectations that bookings would rise for the spring/summer period had already been priced in. Now the concern is that if conflict breaks out, or at the very least a stand-off continues for many weeks to come, confidence among the travelling public could take a fresh knock, and would prove to be yet another set-back to a long haul recovery for the airline industry. British Airways owner International Consolidated Airline Group has hit another bout of turbulence plunging by more than 6%, while Rolls Royce, so highly reliant on the commercial airline sector, fell by more than 5%.
Rising Interest Rates
House builders are vulnerable to rising interest rates and that nervousness is seeping through the sector today with Barratt Developments PLC (LON:BDEV) down 8% and Berkeley Group Holdings PLC (LON:BKG) falling by 6%. Demand for mortgages is expected to continue to wane especially as the cost of living squeeze intensifies. Investors clearly worry that house builders , who have been enjoying the cheap loan party and pent-up demand over the past year, are facing a difficult trajectory with a rapidly cooling housing market now on the cards.
Crypto fans, lulled into a false sense of security amid sharp price rises during the pandemic are now facing a rude awakening with assets plunging across the board with Bitcoin and Ether falling by around 7% today. Crypto coins and tokens have been shown to be highly sensitive to equity prices, propelled upwards on a wave of cheap and easy money. Hopes that Bitcoin would act as an inflation hedge have fast evaporated, losing more than half its value since its November high, as consumer prices have soared. There may be speculators waiting in the wings to buy the big dip, but expect the volatility to continue as money liquidity washing around financial markets evaporates.'
Article by Susannah Streeter, senior investment and markets analyst, Hargreaves Lansdown
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Updated on Jan 24, 2022, 12:28 pm
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