The start of this year has seen exceptional levels of volatility in many risk assets, pushed and pulled by surging bond yields, sinking stock markets and persistent price pressures amid slower growth, even as Omicron fears subside.

Traders are repricing risk with the realisation that interest rate rises are coming, with now likely as many as five hikes this year in the US. The Fed minutes at the start of the month had forewarned us of impending tightening with risky assets looking decidedly shaky at that point.

Equity markets especially, have been volatile with intraday price action noteworthy. For example, the middle Monday of the month was only the third time in history that the S&P 500 was down 4% at the lows and then finished in the green. The selloff in that index has also been one of the fastest ever, taking only 15 trading days to be down 10% for the year on an intraday basis.

Major events of the month, in numbers

–$3 trillion Apple: We kicked off the year with the tech giant becoming the first company in history to hit a mythical $3 trillion market cap. This was effectively a tripling in its value in just three years and that level is more than the nominal GDP of a large economy like the UK. Since January 3, the titan had lost 13%, until its record earnings released overnight.

–Netflix -21.79%: The streaming company warned that subscriber growth would slow substantially in early 2022. This sent the stock plunging in the latest example of investors dumping shares in companies that thrived during the pandemic.  

– $8.8 trillion balance sheet: Fed Chair Powell said earlier this month that “we’re mindful the balance sheet is $9 trillion. It’s far above where it needs to be”. The emergency bond buying program has seen the Fed more than double its assets, with the resulting boost of liquidity directly correlated with an expansion in stock valuations. This is now being withdrawn and policymakers have little experience of doing this.

–$90 Oil: Brent crude hit $90 for the first time in seven years amid concerns about tight supply and rising Russia tensions. Oil has gained roughly 16% this month after a 50% rise in 2021. OPEC is due to meet on February 2 to discuss raising output by another 400k in March. There may be additional pressure from the US and other big oil consumers to act as high inflation looks set to linger.

–1.1131 EUR/USD: The Fed/ECB divergence was laid bare by the move lower in the world’s most traded currency pair after the recent hawkish FOMC meeting. EUR/USD hit lows last seen in June 2020 as the Fed looks to raise rates more aggressively than the ECB, who will stick to a dovish script. Russia tensions are also not helping the single currency.