The equity market is clearing its sinuses
The S&P500 index of large cap US equities more than doubled between the March 2020 lows and the end of 2021. It was up by over 25% last year alone, by about 50% in the three years to end 2021 and by more than 350% over ten years, a compounded annual rate of growth of about 16.5%. This is a remarkable track record and reflective of general strength across global equity markets. In this context it is not surprising that many equity markets have experienced a pullback over recent days. Increased market jitters have been associated in particular with expectations that the Fed will soon start to hike rates and shrink its balance sheet. Negative sentiment has been additionally fuelled by concerns about the Omicron Covid variant and geopolitical tensions between Russia, the US and the European Union concerning Ukraine. In this Macro Flash Note, Daniel Murray assesses the market outlook against this background.
