At the end of the trading day on Monday, Wall Street was roiled once again as major stocks plunged during the day’s trading sessions. Most news outlets indicate the Russia-Ukraine war is causing the bleak outlook and reports show strained financial conditions worldwide are currently the tightest since 2020. Meanwhile, bond markets during Monday’s trading sessions indicate increased inflationary pressures may be on the horizon.
Global investors worry about tight financial conditions
Stock traders did not have a pleasant day in Monday’s trading sessions as the S&P 500, Nasdaq, NYSE, Dow Jones and many other stocks plunged in value. Price shocks and economic fallout are no longer being blamed on Covid-19, as fingers point to the ongoing conflict between Russia and Ukraine in Europe.
While reports say the military warfare has been brutal, economic sanctions are also taking a toll on the Russian economy. Moreover, economists have noted the sanctions are affecting other economies worldwide and this weekend, the International Monetary Fund (IMF) warned the “economic consequences are already very serious.”
The IMF has discussed how the sanctions and war have added “extraordinary uncertainty” and the situation could cause inflationary pressures, supply chain disruptions and price shocks. Additionally, on Monday, Reuters reported that current financial conditions around the world were the “tightest in two years.”
The last major occurrence of a crisis situation affecting markets globally was on March 11, 2020, otherwise known as ‘Black Thursday.’ DZ Bank strategist Rene Albrecht explains if inflation rises and “if the central banks take their mandates seriously, you will see a further (tightening) in financial conditions.”
Bond market volatility
On March 6, Bitcoin.com News reported on the US Treasury yield curve and how it was showing signs of recession. Bond markets continue to reflect a tough economy and further inflation of nearly “2.79% over the next decade,” according to data from Monday morning’s trading sessions.
Bond markets have experienced discontentment and extreme volatility during the last few weeks. On March 2, Ikigai Asset Management’s chief investment officer Travis Kling remarked the “last time bond market volatility was this high, the Fed cut rates 100 bps and did 3 trilly of QE in six weeks.”
In a March 7 memo sent to Barron’s Alexandra Scaggs, Matthew Luzzetti and Deutsche Bank economists discussed the fear of long-lasting inflation and the irritability it could bring to the US central bank.
“In light of recent energy price moves in response to events in Ukraine…long-run inflation expectations could be at risk of moving to an uncomfortable level for Fed officials, especially given the backdrop of these other forces pointing to persistently elevated inflation,” the Deutsche Bank economists said in a statement.
While stocks have fallen significantly in value lately, the crypto-economy has also felt the wrath of an uncertain and fragile economy. The crypto-economy has lost more value since yesterday, dropping to $1.78 trillion, losing 2.8% against the US dollar in 24 hours. Gold, on the other hand, touched $2,000 an ounce on Monday and is currently trading at $1,997 an ounce. Additionally, a barrel of crude oil also jumped to $120.33 a barrel on Monday.
