Things could always get worse. That was the message from investors hitting the sell button in September as the Federal Reserve renewed its vow to use rapid interest rate hikes to fight stubbornly high inflation, even if it spells pain for households and businesses.
The S&P 500 index
on Friday cemented its worst monthly percentage fall since the pandemic lockdowns of March 2020, but also joined the Dow Jones Industrial Average
and Nasdaq Composite Index
in booking the worst, first 9-month stretch since 2002, according to Dow Jones Market Data. “The problem is that at the end of last year, we were priced for perfection and now we are discounting for a disaster,” said David Kelly, chief global strategist at J.P. Morgan Asset Management, by phone. “I don’t think any of us can remember a time for both stocks and bonds — probably back to 2008 — that’s gone as badly as this year.” But with the carnage, Kelly and others also see a chance to pick up beaten-down stocks and bonds, without waiting for the market to bottom or the Fed to finish its inflation fight. Carnage: a look at the costs Stocks and bonds have been hit especially hard since Russia launched its war against Ukraine in February, or a month before the Federal Reserve began raising interest rates from near zero. Government bond returns were at -9.1% (see chart) six months into the Ukraine war, according to BofA Global, a steeper decline than the same time frame of other war in the past 70 years.
Bond, stocks hit hard by Russia’s Ukraine war
Russia’s intensifying war against Ukraine clearly has fueled inflation around the world, spooked markets and exacerbated Europe’s energy crisis. A global flight to safer assets also has pushed the U.S. dollar even higher in September,
while ramping up concerns about potential damage to emerging markets and U.S. corporate earnings. There’s also the roaring U.S. labor market, which looks unlikely to cool when the August jobs report arrives next Friday, a key economi …