Markets fell further last week, which is now the worst start to a year since 2016. The NASDAQ moved to ‘correction’ territory (defined as a 10% fall from its peak) as growth orientated companies in particular have been caught up in the current market turmoil. However, it is worth noting that markets have been on an incredible strong run since March 2020, and we have experienced benign market conditions over that period. For example, the last bull market saw double digit falls in 8 of its 11 years – with the aforementioned 2016 equity return finishing up over 10%.
From our perspective, as outlined in our wider Investment Outlook document: ‘historically equity markets have not peaked until employment has peaked, the start of a tightening cycle does not guarantee a future recession and policy remains accommodative.’ However, whilst history provides useful lessons, we do not follow it slavishly and maintain an open mind and flexible approach for the period ahead.
In terms of new for the week ahead there will be plenty to digest. The Federal Reserve meeting on Wednesday will be closely watched (when is it not?) whilst over a third of the S&P 500 will report Q4 earnings. It will be interesting to see how the likes of Microsoft, Amazon, Intel, Apple, and Alphabet get on amidst the current negative sentiment toward technology companies. In short, plenty to move markets over the coming five days.