Equity markets were crashing down as bond yield continues to rock the boat and Russell 2000 took the biggest hit as major indices dived further into the trading session.
🪜Bond yield continue to climb🕹
Stocks were under pressure as bond yield spiked up on the backdrop of geopolitical risk in the Middle East coupled with Omicron looming in the background. In addition, investors are bracing for the reality of multiple rate hikes given the relentless hot inflation running.
10 years treasury yield hit 1.87%, which is the highest level since before the pandemic onset. Recall that the yield stood at 1.53% at the beginning of the year. This ultimately adds pressure to Nasdaq, given that most high technology stocks promise profits in the future that is discounted in the present value.
Investors will have to look at corporate earnings to determine whether the economic expansion is sufficiently strong to help companies earn a fatter profit to justify the elevated valuation.
🎢Oil prices jumping higher⏰
The higher oil prices are likely to add fuel to the already problematic inflation. It had jumped to the highest level since Oct 2014. Moreover, geopolitical risks that are generally difficult to hedge have realised their impact on the equity market.
Supply risks climbed given the risk of a Russian invasion of Ukraine on the backdrop of a weak political will by OPEC to achieve its production targets. In addition, we have read about countries such as Nigeria and Angola facing difficulties to hit their quotas due to production woes.
If oil prices contribute further to the bleak inflation narrative, Pika World expects more pressure on the equity market.
Pika World is expecting a highly volatile week ahead as a stream of earnings calls will help us shed light on the impact of multi-dimensional concerns confronting businesses.
Cheers,
Pika Nat.
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