S&P 500 woes continue amid uncertain outlook - Raiz Invest


George Lucas, Raiz Group CEO

Right now, all market news is focused on the US and its main indexes, with the S&P 500 down by around 6 percent year-to-date and the NASDAQ Composite about 10 percent lower, roughly 12 percent off its mid-November high, surpassing the popular definition of a “correction”.

Among notable moves this week was Netflix shares tumbling 21.8 percent, which also weighed on the S&P 500 and the Nasdaq, after the streamer forecast weak growth in subscriber numbers.

With worries about the impact of the Omicron variant fading, I believe the fall in equities may be linked to investors reassessing the prospects for those companies that saw demand boom over the pandemic, as customers become more time poor and they transition from a WFH environment.

Another key trigger, in my view, has been the sharp rise in bond yields, with benchmark US Treasury yields recently jumping to two-year highs.

Looking ahead, there will likely be further big falls in US equities, leading global equities down further. March is a time of tighter liquidity where seasonally we often see equity market sell-offs.

However, I still doubt the S&P 500 will have an awful year, even though the current rotation away from tech and growth stocks will continue.

Remember, the decline in US equities from their highs has reversed only a fraction of the strong gains over the course of the pandemic. Putting it in perspective, the S&P 500 remains about 40 percent above its end-2019 level, while the NASDAQ Composite is still around 60 percent higher.


Inflation concerns persist in US

Still in the US, inflation remains very high compared to the past decade, with US Federal Reserve chair Jay Powell calling it a “severe threat” to economic expansion and labour market recovery.

In response, the Fed is on course to steadily remove the ultra-accommodative monetary policy that was put in place to assist the economy during the pandemic. Indeed, this week it is reportedly set to confirm plans to hike interest rates in March for the first time since the start of the pandemic.

In Australia, we can also expect a rate hike in earlier rather than later. Australia’s jobless rate has fallen to 4.2 percent, the lowest rate since 2008, and the RBA is likely to end its asset purchases in February. Wage growth will reach the RBA’s threshold rate of 3.0 percent by the end of the year.


Bank Indonesia hints at normalising policy

In Asia, Indonesia’s central bank gave the first signs this week that it will begin normalising policy, even though it left its benchmark interest rate unchanged.

Despite this, the bank revealed that it will start raising its reserve requirement ratio, hiking it to 5 percent in March with more increases to come after that.

This will affect how much money banks can lend, and the liquidity in the Indonesian market. The aim of this move is to defend the Indonesian rupiah and economy as the world prepares for the US Fed to lift rates. China just asked the US and the West politely not to raise rates, which I think they may ignore.



Don’t have the Raiz App?

Download it for free in the App store or the Webapp below:

Click to download the Raiz app


Important Information

If you have read all or any part of our email, website, or communication then you need to know that this is factual information and general advice only. This means it does not consider any person’s particular financial objectives, financial situation, or financial needs. If you are an investor, you should consult a licensed adviser before acting on any information to fully understand the benefits and risk associated with the product. This is your call but that is what you should do.

You may be surprised to learn that RAIZ Invest Australia Limited (ABN 26 604 402 815) (Raiz), an authorised representative AFSL 434776 prepared this information.

We are not allowed, and have not prepared this information to offer financial product advice or a recommendation in relation to any investments or securities. If we did give you personal advice, which we did not, then the use of the Raiz App would be a lot more expensive than the current pricing – sorry but true. You therefore should not rely on this information to make investment decisions, because it was not about you for once, and unfortunately, we cannot advise you on who or what you can rely on – again sorry.

A Product Disclosure Statement (PDS) for Raiz Invest and/or Raiz Invest Super is available on the Raiz Invest website and App. A person must read and consider the PDS before deciding whether, or not, to acquire and/or continue to hold interests in the financial product. We know and ASIC research shows that you probably won’t, but we want you to, and we encourage you to read the PDS so you know exactly what the product does, its risks and costs. If you don’t read the PDS, it’s a bit like flying blind. Probably not a good idea.

The risks and fees for investing are fully set out in the PDS and include the risks that would ordinarily apply to investing. You should note, as illustrated by the global financial crisis of 2008, that sometimes  not even professionals in the financial services sector understand the ordinary risks of investing – because by their nature many risks are unknown – but you still need to give it a go and try to understand the risks set out in the PDS.

Any returns shown or implied are not forecasts and are not reliable guides or predictors of future performance. Those of you who cannot afford financial advice may be considering ignoring this statement, but please don’t, it is so true.

Under no circumstance is the information to be used by, or presented to, a person for the purposes of deciding about investing in Raiz Invest or Raiz Invest Super.

This information may be based on assumptions or market conditions which change without notice and have not been independently verified. Basically, this says nothing stays the same for long in financial markets (or even in life for that matter) and we are sorry. We try, but we can’t promise that the information is accurate, or stays accurate.

Any opinions or information expressed are subject to change without notice; that’s just the way we roll.

The bundll and superbundll products are provided by FlexiCards Australia Pty Ltd ABN 31 099 651 877 Australian credit licence number 247415. Bundll, snooze and superbundll are trademarks of Flexirent Capital Pty Ltd, a subsidiary of FlexiGroup Limited. Lots of names, which basically you aren’t allowed to reproduce without their permission and we need to include here.

Mastercard is a registered trademark and the circles design is a trademark of Mastercard International Incorporated.

Home loans are subject to approval from the lending institution and Raiz Home Ownership makes no warranties as to the success of an application until all relevant information has been provided.

Raiz Home Ownership Pty Ltd (ABN 14 645 876 937), an Australian Credit Representative number 528594 under Australian Credit Licence number 387025. Raiz Home Ownership Pty Ltd is 100% owned by Raiz Invest Australia Limited (ABN 26 604 402 815).