Stocks get wobbly start to new month after volatile January
Al JazeeraDec 27, 2021
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.
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.