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Volatility, Trade Wars and Inflation – Welcome to the Future

April 2, 2018

|Daniel A. White

We all know that volatility is back. But why did the market go nutso last month? I think a few reasons stand out.

First, the Federal Reserve’s recent guidance suggests future rate hikes will be quicker than forecasts anticipated. Everyone expected the quarter-percent hike now, but not the pace of future hikes.

By the end of next year, the borrowing landscape could be quite a bit more expensive. And all of that points to higher inflation, which scared investors.

Another volatility catalyst was President Trump’s announcement of $50 billion in Chinese tariffs.

For many, this is a shot across the bow in a potential trade war. And that will likely ensure at least one thing – higher prices for consumers.

A third reason for market commotion is Facebook. It’s been all over the news since the announcement of data leaks, and the stock price has reflected the negative news.

Facebook has lost billions of dollars in value, and since it’s one of the biggest names in tech, the entire sector remains under pressure to perform – both in its business practices and on the balance sheet.

The February lows even caused the Fed to change its outlook from “solid” to “moderate.” That could be a simple choice of words, but with the glaring attention being paid to the Fed, everything matters.

What does it all means for investors? Probably that one of the only certainties will be uncertainty.

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