Investors shed global equities on BoE interest-rate hikes
What is it?
“Global stocks stumbled as the European Central Bank and the Bank of England soured investor sentiment around inflation on Thursday. . . the BoE delivered its widely expected second UK interest rate hike in three months”*
“Making only the smallest change to its statement, the ECB removed a clause stipulating that its next policy move could be in ‘either direction’.”*
Why does it matter?
We are not here to pick one investment that is the best. We are trying to form portfolios that meet the needs of our clients. By investing in places like Europe (specifically IEUR) we hope to diversify our portfolio of investments. This may help investment performance in a time when U.S. equities are struggling to inch higher.
As the European Central bank started raising rates and plans to continue, we will be keeping an eye on how the stock market reacts in the future. However, we believe that European Equities will have more favorable conditions. We believe that the European economy will not have to fall as far to correct back to more reasonable levels because the U.S. had more economic relief.
Investors are hesitant after glum Facebook status update
What is it?
“On Wall Street, investors digested the shock of a 20% plunge in Facebook owner Meta’s shares (FB.O) announced”*
Why does it matter?
Meta’s large drop in share price could indicate what is to come as monetary conditions are expected to tighten in the U.S. While projections may be modest from this point for most companies, it may be hard for them to sustain the growth attained in 2021. Last year there was unprecedented help for producers and consumers, but that should not last.
We believe that the markets may have overrun a sustainable amount of growth. After the recent drawbacks, the stock market may even sell off to a point where it is vastly undervalued or cheap. However, cheap can get cheaper (or lose more value) especially in a bear market. We believe that more and more companies will begin to fall short of earnings expectations as economic conditions tighten compared to 2021.
Other articles I found interesting this week:
Sports Betting Surges For Millennials
WHO says Europe entering ‘plausible endgame’ to COVID pandemic
Stock market news live updates: Stocks plunge after Facebook-led tech sell-off; Nasdaq sheds 4%
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Our last portfolio reallocation: 1/31/2022.
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Our process attempts to identify trends and momentum in the financial markets. With that information, we align our clients’ portfolio accordingly in the hope to help our clients accomplish their life goals while attempting to lower the risk of a large drop in their portfolio.
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Sources:
*Katanga Johnson. “Investors shed global equities on BoE interest-rate hikes, glum Facebook status update”. 2/3/2022. https://www.reuters.com/markets/europe/global-markets-wrapup-1-pix-2022-02-03/
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