Investments in growth stocks may be especially volatile. Investing in emerging markets is very risky due to the additional political, economic, and currency risks associated with these underdeveloped geographic areas. Foreign investments may be volatile and involve additional expenses and special risks, including currency fluctuations, foreign taxes, and political and economic uncertainties. Fixed income investments are subject to interest rate risk, and their value will decline as interest rates rise. The investment return and principal value will fluctuate, and shares, when sold, may be worth more or less than the original cost. Some investments are riskier than others. If inflation does not show signs of moderating as expected in the coming months, we think any “Volcker” moment of more aggressive Fed action would likely come late this year or early next year. In the U.S., the Fed appears to be behind the curve raising downside risks for the economy. Given that supply-chain disruptions are easing and markets expect long-term inflation expectations to come down, there is still opportunity for the Fed to engineer a soft landing by becoming more aggressive quickly.
Of course, the unpredictable course of the Ukraine conflict, the global response, and the associated impacts on the world’s geopolitical order and financial system will continue to drive market dynamics in the near term.Īs inflation has become more broad-based and remains stubbornly high, central banks have ramped up their hawkishness, with many investors anticipating a stagflation or recession scenario. The good news is that this could mean that we’ll come out on the other side faster. We are moving through the business cycle at an aggressively compressed rate, with markets feeling more pronounced shocks along the way.
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