Volatility has seen January 2022 rank as one of the worst months for the market in recent years, with losses in the stock markets on course to equal returns in March 2020.
Among key drivers of the drawdown have been inflation and Federal Reserve interest rate hike fears.
Elsewhere, performances across the market have also been hit due to supply chain issues in the wake of a new wave of Covid-19 and recent flaring in geopolitical tensions between Russia and Ukraine.
January also saw chaos in Kazakhstan and fresh woes in Libya play a role in market movements over the month.
With US markets about to close on 31 January, here is a review of the major takeaways of the first trading month of 2022.
Stock markets faced their worst sell-off since March 2020. The S&P 500 fell 6% in January, while the Dow Jones Industrial Average was down 3.4% and the Nasdaq Composite 10% off the monthly open. Most stocks fell below their recent highs.
European and Asian markets also shed gains from the tail-end of 2021 to close negative. The pan-European Stoxx index closed 3% down while the FTSE 100 is flat.
Fed monetary policy
The Fed’s January meeting confirmed the central banks' hawkish stance on monetary policy tightening and interest rate hikes starting in March. Investors continue to fret over the impending rate hikes, which are likely to be 4-7 according to projections from economists and analysts.
Investors also had to contend with rate hike language from the European Central Bank and the Bank of England, while China’s central bank surprised with a rate cut. This week has investors awaiting decisions from the ECB and the BoE, with the UK central bank likely to go for a second hike.
January saw some strong earnings from major companies on Wall Street, with notable upside price moves for Apple Inc., Microsoft Corp., and Visa. Tesla and Netflix shares tanked before bouncing, while tech giants Amazon, Meta Platforms, and Google parent Alphabet report this week.
Over three-quarters of companies to report their earnings by Monday beat analysts' expectations.
Projections suggest this year’s earnings will top 2021 figures by 8%, though the upbeat outlook has had little effect on the broader market sell-off.
Gold, oil, and Bitcoin
Gold rose on Monday as it bounced off early-morning losses. However, despite the upside, the precious metal is set to end the month lower by about 2%.
Oil has had a good few weeks, with Monday’s rally to $91.72 and $88.83 the peak since 2014. With gains on course for a 17% spike, oil prices are seeing their best monthly return since February 2021.
In cryptocurrencies, Bitcoin touched lows of $33,000, with monthly losses of 17% taking the drawdown from its $69,000 peak reached in November to 45%. The cryptocurrency was trading around $38,480 on Monday at 3 pm ET.
What next for markets?
Analysts say the markets will likely bounce as the economy expands after the 6.9% pace seen in Q4. Strong earnings from the likes of Amazon and Alphabet could buoy sentiment and support continued recovery. However, monetary policy and geopolitical events remain key.