The Facts
- January saw the poorest performance in US equity markets since March 2020, when the pandemic abruptly closed many businesses.
- Stock valuations tumbled as investors fear rising interest rates and inflation, both of which might dampen consumer spending, economic activity, and ultimately corporate revenues.
- Much of the January decline was focused on high-growth tech stocks, which had been the biggest gainers in recent years.
Sources Split
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CENTER
RIGHT
ESTAB
CRIT
CENTER
PRO
ESTAB
The Spin
Narrative A
US stocks have been over-sold, and then over-corrected. Investors are now sitting on piles of cash that they'll pour back into equities, paving the way for a "violent" rally in the coming months.
Narrative B
The rise of ETFs has fundamentally altered equity markets. Greater ETF ownership means lower overall liquidity; when there's less free capital to absorb losses, volitility rises as we saw in January. These structural changes are here to stay, as is greater volitility.
