In today's post Michael reviews what is happening in the financial markets. Current clients may recognize this from our Weekly Insights email. If you would like to receive the weekly email please let us know by contacting Sara at sara@masonwealthmanagement.net.
January 2022 was a month of significant repricing in the stock and bond markets. But that is it. We are not witnessing panic or markets in turmoil. They are doing exactly what they should which is take in the new information that interest rates will be higher in the future. The Federal Reserve has signaled that they are more concerned with inflation than asset prices (which I think is correct). This has started the process of reassessing how we value investment assets like stocks and bonds. We can witness this by the fact that the Dow Jones Industrial Average is only down about half of what the NASDAQ lost in January. I have been beating the drum that there were parts of the stock markets that were not rational. We were so manic that companies could place a recycle bin at the end of their driveway, claim they were now an ESG stock (ESG= Focused on Environment, Social and Governance) and the stock market would instantly react to move their stock price higher. Obviously, this is a bit tongue in cheek, but these are the segments of the financial markets that could experience significant losses only because their true value might be considerably lower. The rest of the markets could feel some more hits, but I don’t see an imminent recession that would significantly affect them. In fact, once the Omicron wave is over and spring begins, we could see a significant boost in economic growth.