Why did the market fall sharply as soon as the war broke out? Have the hedging measures, capital control and risk aversion all failed?
First of all, we need to clarify the key factor that currently dominates the overall market trend: the monetary policy of the Federal Reserve. The reason why the Federal Reserve continues to implement a monetary tightening policy is the rise in inflation. In inflation, raw materials and energy play a pivotal role.
It is particularly noteworthy that as a "wheel-driven country", almost all industries in the United States are affected by oil price fluctuations. Once the war affects oil prices, it is likely to cause inflation to rise again, and the continued recurrence of inflation may prompt the Federal Reserve to continue its economic tightening policy.
The direct consequence of the high interest rate environment is that the risk of economic recession is increasing day by day. Therefore, the war, rising oil prices, increased inflation expectations and the continued tightening policy of the Federal Reserve have jointly led to pessimistic market sentiment.
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