Market Volatility Continues

Ed Mertiri |

TV Interviews with Erin Gibbs

Market Reaction to Federal Reserve Rate Increase and Comments

Bloomberg TV

Fox News

Market Volatility Continues After April Unemployment Report

 

Bond yields are moving rapidly higher, pushing bond prices sharply down. The steady decline in bond prices has eroded the traditional view that bonds were a safe haven and diversified a portfolio’s performance. For much of 2022 bond prices and equity prices have been correlated to the downside. This creates a uniquely painful situation for investors where both bonds and equities are in decline. Naturally this double whammy investors nervous and creates negative bias across markets.

At this point, negative sentiment is so pervasive, investors will need several points of stabilization before getting back into equities and bonds. It is notable that the VIX has been in the “fear range”, over 30, for 7 out of the last 8 trading sessions. The only day it dipped below 30 was Wednesday the Federal Reserve announcement day. This made it clear that fears just can’t be removed by one press conference.

While Chairman Powell tried to assure investors that a 75bps rate hike is not in the future, the strong employment report on Friday unraveled what little assurance there remained. The strong unemployment report ironically raised furthers doubts that the Federal Reserve can navigate the US economy in to a “soft landing”, meaning they can reduce inflation without causing a prolonged economic slowdown or even a recession.

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