- Whether the market bottoms out and rebounds depends on signals from the Fed and de-escalation in Ukraine, says iCapital’s chief investment strategist.
- If the Fed says it will be less hawkish and the crisis in Ukraine eases, the market could rally, Anastasia Amoroso told CNBC.
- But for now, she warned that investors should be careful as it is too early to call an “everything clear”.
The stock market sees rising risks this week as new sanctions weigh on the Russian economy and war rages in Ukraine, but two catalysts could signal a bottom and trigger a new recovery, said Anastasia Amoroso, chief strategist investments at iCapital.
These include the de-escalation in Ukraine and any signs that the
won’t be as hawkish on rate hikes, she told CNBC in an interview Monday.
For now, it is too early to say that everything is clear and investors should not bet on a rally like last week’s just yet, as there are still more unresolved risks on the table than there are. a few days, she added.
“I’m not saying yet that we’ve seen the bottom of this market. I think we have to be careful here,” Amoroso said.
She highlighted the potential unintended consequences of sanctions, such as changes in commodity flows or whether those commodity flows are “weaponized.” Cyberwar retaliation from Russia is also possible, she warned.
But Ukrainian and Russian officials began talks in Belarus on Monday, and Fed chief Jerome Powell begins two days of testimony on Capitol Hill on Wednesday.
“If we’re going to make progress in Ukraine this week, and if we hear a message from Fed Chairman Powell on Wednesday that they’re cutting maybe some of the more hawkish interest rate hikes, then that could be the two catalysts the market really needs to find a bottom here and bounce off that,” Amoroso said.
Others on Wall Street expect the Fed to take a softer approach to rate hikes this year. Last week, top economist Mohamed El-Erian said the Federal Reserve would not be able to tighten monetary policy as aggressively now that Russia has invaded Ukraine.
Previously, many analysts expected several Fed rate hikes in 2022, starting with a 50 basis point hike next month.
“That takes 50 basis points completely off the table,” El-Erian told CNBC on Thursday. “It removes the 8, 9 hikes that a lot of people were talking about for this year, and thankfully I didn’t think the US economy could adapt and live with such a slam of the monetary policy brakes.”