Investors turn risk averse

Risks mount up

Stock markets are having a tough time on Tuesday, with Europe seeing losses around 2% and the US not far behind as investors turn more risk-averse.

There’s been so much to take in over the course of the last week, starting with Evergrande’s “Lehman” comparisons, to all being well again and now, investors seemingly becoming increasingly concerned about what lies ahead. Little has actually changed in that time but attitudes may well have.

Last week, the message from central banks was that inflation is (mostly) transitory and the need for emergency era stimulus is almost behind us. The recovery is slowing but the expectation is that it will bounce back, as will price pressures. While that message doesn’t appear to have shifted this week, investors don’t appear as comfortable.

Perhaps the case for buying the dips is diminishing in a world where central banks are planning to pare back stimulus due to higher inflation rather than economic strength. Or maybe a winter of discontent is becoming more of a worrying reality as energy shortages trigger massive price increases.

Or is the ever-expanding list of risk factors finally starting to weigh on sentiment and investors are as uncertain as central banks seem to be about what the next 12 months holds? Whatever is happening this week in markets, it doesn’t look like abating any time soon.

Bitcoin continues to look vulnerable

Bitcoin is heading lower once more after it again failed to generate enough upside momentum to break out of its recent range. The cryptocurrency has appeared to be edging towards a correction for some time but has shown incredible resilience. With it once again heading back towards $40,000, a steeper correction may be on the cards if a significant break of this level follows.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Craig Erlam

Craig Erlam

Senior Market Analyst, UK & EMEA at OANDA
Based in London, Craig Erlam joined OANDA in 2015 as a market analyst. With many years of experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while producing macroeconomic commentary. His views have been published in the Financial Times, Reuters, The Telegraph and the International Business Times, and he also appears as a regular guest commentator on the BBC, Bloomberg TV, FOX Business and SKY News. Craig holds a full membership to the Society of Technical Analysts and is recognised as a Certified Financial Technician by the International Federation of Technical Analysts.
Craig Erlam
Craig Erlam

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