Will rapid interest rate hikes trigger panic among investors?

Soon the US Federal Reserve (FED) will take things seriously, will investors deal with it? At least we know that investors around the world are uncertain and maybe a little scared. The nervousness is palpable, and the stock markets fluctuate accordingly. The outcome space in the pricing of crypto and shares is larger than in a long time… April was illustrative and thought-provoking. April's correction on the major index in the New York, S&P 500 came in at almost 9 percent. We must go back to the beginning of the pandemic to find a worse correction in a single month. The latter index is "the world's most important stock index" and when it falls 9 percent in a month, we should really pay attention - especially if you are heavily invested. However, as one can see in the chart below May did bring a good month in terms of return. So, if you invested in early May you got a nice profit already. Is this the bottom? Only time will tell, I would be conscious in time of writing.

Source of use: Infront

The corrections that we have seen now is an opportunity for the investors that have cash if we are to angle it positively. So, what I am trying to say is that the risk of buying into the top is less. And yet, several impressive quarterly results are delivered from companies around the world. We have also had company disappointments, and no company lives in a vacuum. The probability of economic decline is increasing. Then, unfortunately, the companies' earnings will also suffer quickly. Europe, the United States and China can overthrow each other. The energy crisis in Europe could lead to a faster increase of the US inflation. At the same time, the huge shutdown in China could intensify the world supply crisis.

Above all, the stock market year 2022 is still largely at the mercy of the Fed, and to a certain extent also their European counterpart: the European Central Bank (ECB). The key interest rates are going up to stagnate the sky-high inflation, but preferably not so fast that investors are generally panicking. This job must be one of the most difficult jobs in the world right now!

Is FED able to find the optimal balance? These are the biggest and most important questions of the financial year! FED raised the interest rate by half a percentage point (0.5) in May! Several sharp interest rate hikes are expected throughout the year. No matter how many and how large interest rate hikes there are in the future, investors should consider that the interest rate journey can further trigger more turmoil in the markets, both in terms of crypto- and equity markets.

The ups and downs in the stock market can continue for a long time. Fewer and fewer dare to rule out more regional recessions. Maybe at some point we will also see a global decline. In that case, commodity prices may also suffer more permanent damage. So far, the drop is not noticeable. The outlook for the commodities sector is quite good worldwide. The industry has, as many know, provided protection against the war, and against many of the price increases that are now plaguing the globe.

No asset class is risk-free. Going forward, any small saver or big investor should continuously assess how heavy a risk one is willing to take. It can be tough going forward, stay awake and choose investment options wisely.

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Cheers -Olebulls

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