A brutal Friday sell-off led by tech blue chips marked the fitting end to a terrible April for stock markets. The Nasdaq Composite Index dropped 4.2 percent on Friday, bringing its April losses to 13.3 percent – the worst monthly performance since October 2008. And while the Dow Jones and the broader S&P 500 weren’t hit quite as hard as the tech-heavy Nasdaq, declining 4.9 and 8.8 percent in April, respectively, they too notched their worst month since March 2020.
The reasons for the current market weakness are manifold: a lingering pandemic, a global chip shortage, supply chain disruptions, surging inflation and a war in Europe that many fear could escalate into a global conflict. Making things worse, many of the aforementioned crises are interconnected and none of them can be easily resolved. The overall outlook is as bleak as it hasn’t been since the onset of the pandemic, but even then, while there was plenty of uncertainty, there was also hope for a quick rebound. And while the rebound from the initial Covid crash was in fact swift, it was also short-lived as we are currently witnessing.
The International Monetary Fund recently cut its growth projection for the global economy for 2022 by 0.8 percentage points compared to its January projection and by 1.3 points compared to its October 2021 outlook. The IMF is now projecting 3.6 percent growth in 2022 and 2023, citing the economic damage caused by the Ukraine war as the main driver behind the latest downgrade: “The economic effects of the war are spreading far and wide – like seismic waves that emanate from the epicenter of an earthquake – mainly through commodity markets, trade, and financial linkages. Because Russia is a major supplier of oil, gas, and metals, and, together with Ukraine, of wheat and corn, the current and anticipated decline in the supply of these commodities has already driven their prices up sharply.”
