These 2 charts show that investors are more scared of Jerome Powell than they are of Vladimir Putin
Two ongoing sagas have rattled markets over the past year: the Federal Reserve's aggressive interest-rate hikes and Russia's war in Ukraine.S&P Global Purchasing Manufacturers' IndexThat sounds like good news for stocks but in the current context, it's not – because a strong economy gives the Fed more scope to hold interest rates higher for longer without cratering growth.
When the cost of borrowing is higher, stocks struggle because their future cash flows take a hit, chipping away at their overall valuations. Two Fed policymakers said last week that the central bank hadn't ruled out a 50 basis point hike at its March meeting – a return to the aggressive monetary policy that defined last year as it sought to crush inflation.
That echoed the signaling of chair Jerome Powell, who's repeatedly warned that the cost of borrowing will have to stay higher for longer to bring the rate of price rises down to the central bank's 2% target., which have spiked by over 50 basis points to 3.93% in February, capture investors' anxiety. Fixed income offers lower relative returns if traders expect interest rates to stay high, so bond prices fall and yields rise.
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