Sturm and Drang are perhaps the right words to describe the prevailing global market situation.
These words come from the German language, literally meaning storm and stress.
In a storm created by rising inflation and the Fed, the markets are stressed over rising interest rates and liquidity concerns.
Earnings come to the rescue.
Last week the US indices were on a roller coaster ride, ending marginally up for the week, thanks to stellar earnings reports of the index heavy-weights Apple, Tesla, and Microsoft.
Friday's 3.13% rally saved Nasdaq from officially entering the bear market territory.
For the week, The Dow was up by 1.3%, S&P 500 was up by 0.8%, while the Nasdaq index was flat. The YTD numbers are Dow - 4.4%, S7P 500 - 7.00%, and the Nasdaq - 12.00%.
As expected, the overall corporate earnings continue to grow, with earnings expansions expected to be in line with the historical average of 9.00%.
Despite some outstanding earnings numbers from companies like Apple, Tesla, and Microsoft, markets have not rewarded them adequately amidst the prevailing weak sentiment.
We will see persistent volatility during the earnings season as some buy on dips while others sell the rally.
Moving on to Europe
European equities fell for the fourth week in a row, owing to the Russia-Ukraine crisis and rising interest rates. The Euro Stoxx Index was down by 1.87%, while the FTSE was down by 0.37%
Moving Further East into India and China
Chinese equities continued to fall on weak global cues and are officially in a bear market territory. Last week, The Shanghai Composite Index lost 4.6%, and the CSI 300 Index slid 4.5%, falling more than 20% from its peak in Feb 2021.
India
Indian equities were in the red for the second week in a row on global cues, rising crude prices, and sustained selling by FIIs.
The Sensex fell by 3.1%, and the Nifty slid by 2.92%.
The FIIs sold heavily in 2021 and continue to sell in January. Hopefully, the budget-2022 will give them a few reasons to reverse this trend.
Outlook.
As stated in the 17th January edition - A Bumpy Ride: 2022 is perhaps the year to focus on the return of your capital rather than the return on your capital.
Markets may be volatile throughout the year, so it would be wise to use the rallies to reduce risk and diversify into value stocks and safe havens.
People sitting on the sidelines and long-term investors can find more than a few bargains amidst the corrections.
As global economies continue to grow at a healthy pace, the outlook for equities is still bullish; however, the growth will be moderate, unlike in 2020 and 2021.
However, escalating geopolitical events like the Russia-Ukraine crisis can be a spoilsport.
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