Investors should be aware that we are living in difficult times, with central banks struggling to combat stagflation that is unlikely to be reversed. The Fed will face a huge challenge in the future in attempting to control inflation through contractionary monetary policies while avoiding a slowdown in economic growth and a stock market crash.
As a result, stock traders should be cautious when choosing stocks and investing in equity markets this year, as the stock market is expected to experience more waves of volatility as the year progresses.
According to Charles Evans, President of the Chicago Fed, the US central bank should work to raise interest rates until they reach a point near neutral in 2022, implying that interest rates could rise seven times this year. Currently, there are five interest rate options.
Furthermore, as nations around the world try to deal with global supply chain constraints and sensitive international relations, the conflict between Russia and Ukraine is likely to have an impact on stock market performance in the coming weeks, if not months.
To avoid defaults, Russian President Vladimir Putin recently allowed businesses and the government to settle debts owed to international creditors in Russian rubles. The movement of capital in the country has been restricted by Western nations.
In addition, in response to Russia's aggression toward its neighbor, several multinational corporations have announced that their operations in Russia will be phased out, including Shell (NYSE:SHEL), Netflix (NASDAQ:NFLX), and TikTok.