Investors were coping with chronically high inflation, a rising currency, and massive interest rate hikes throughout the globe that threaten to stifle economic growth as the 7% decline occurred.
Investors are eager for any positive news to distract them from the terrible quarter for equities that brought the value destruction for this year to $24 trillion. They might get that if the corporate results season is strong.
The MSCI All-Country World Index has just finished its third consecutive quarter of falls, which is a first since the 2008 global financial crisis.
Investors were coping with chronically high inflation, a rising currency, and massive interest rate hikes throughout the globe that threaten to stifle economic growth as the 7% decline occurred. In addition, analysts have lowered profit projections, and a number of US and European businesses, notably automaker Ford Motor Co., have issued preliminary results warnings.
The stock market, which is currently at levels last seen nearly two years ago, could benefit from a much-needed resurgence if corporations have a lower bar to clear.
That does not imply that businesses will end the season with perfect marks. There are still several obstacles that might make 2022 forever remembered as a bad year.
One reason is that it is getting harder to defend profitability in the age of increased costs. As central banks remain intent on containing inflation, businesses must also contend with tighter monetary policy from the Federal Reserve, the Bank of England, and other institutions. Additionally, there is the conflict in Ukraine, a serious energy issue in Europe, and detrimental Covid limitations in China.
Dollar Effect
The risk posed by a higher currency to US businesses with significant overseas exposure was highlighted by Nike Inc.’s dismal earnings release on Thursday.
On the other hand, importers from Europe and the UK must contend with substantially weaker currencies. Both the Swedish fashion store Hennes & Mauritz AB and the UK multinational Associated British Foods Plc attributed a worsening earnings outlook to the dollar.
But according to Esty Dwek, chief investment officer at Flowbank SA, “certain disappointments are already predicted and probably even priced in to some extent” given the size of recent analyst downgrades and the market’s response to early news.
