The markets are a mess, and not just in the USA, where the three major stock indices are down more than 20% each from their highs. If you think that things are going badly in Colombia, you may be wrong, because the world is experiencing the highest interest rates in recent times. Stocks in the red, investors feel the promise of the FED.
“Everything is starting to have a big impact”says Edmund Shing, global chief investment officer at BNP Paribas Wealth Management.
Around the world, markets reel with unpredictability. Currency values are plummeting. Oil and other raw materials are taking a hit. There is fear and panic in the bond markets and on the stock exchanges in Frankfurt, Tokyo and Shanghai.
President Joe Biden has met twice in the past week with his economic team, which includes the Treasury and Commerce secretaries, for updates on the rapidly evolving global financial and energy markets.
And there seems to be almost global agreement on who is causing all this extreme and painful volatility: the central banks, with the US Federal Reserve in the lead.
That’s a significant role reversal, and investors aren’t happy about it.
One of the biggest brains in finance, Mohammed El-Erian, Allianz’s top economic adviser, told CNBC on Monday that “It’s about governments and central banks being sources of volatility, rather than suppressors of volatility. They are increasing volatility«.
Interested in: US stocks crash like in June 2020
The Fed and its counterparts in other countries routinely do their best to calm the markets. Their goal is to keep the economy going, or to get it going again.
But instead of extinguishing the economic and financial fires, according to many big investors, those steadfast central banks are fanning them.
Why do they blame central banks?
To be sure, the central bankers did not start the fires. The pandemic, a war, and many other factors combined to create the world’s biggest economic problem: high inflation.
Now, many of those factors are also causing other problems. The war in Ukraine is generating an energy crisis in Europe. Supply chain disruptions continue to plague companies with a global presence.
What Wall Street wants is clear guidance on where central banks think the economy is headed and what their plans are. But these days, they’re not getting it.
“I think the markets had become too sheltered from central bank guidance and central banks were operating in an environment where they felt they could deliver it with a reasonable degree of confidence”says Daragh Maher, head of research for the Americas at HSBC.
???? Black Monday on the BVC, shares plummet again