The first trading week of 2022, accompanied by a sensation in the financial market, sent a clear message that this year is not for the faint-hearted.

To be fair, investors and analysts know it can be lively. The Federal Reserve — the chief firefighter of the market — has made it clear that in the face of expanding inflation, it is scaling back its Covid-era stimulus measures. At the December policy-making meeting, it has accelerated the pace of reducing asset purchases. “Hawk pivot”.

Looking forward to this year, there is no need for a market scholar Figuring out that the complete withdrawal of support and the introduction of US interest rate hikes (remember?) will create a challenging environment for risky assets pushed up by the Fed’s economic generosity. In layman’s terms: the rise must fall.So, the fund manager Ready For volatility. Even if we end up with major stock indexes higher before the end of the year, setbacks are inevitable.

Nevertheless, the release The minutes of the Fed’s last meeting this week left its mark.

Solita Marcelli, chief investment officer of UBS Global Wealth Management Americas, said: “The minutes of the meeting are usually quiet, but certain statements indicate that the Fed is willing to raise interest rates faster and faster than investors expected.” As with many other investments Together, some were caught off guard.

Combined with signs that the Fed is studying the details of how to cut its $9 trillion balance sheet, Wednesday’s meeting minutes prompted traders to increase their bets on the fastest rate hike in March.

“What surprised the market was that [rate setters] It seems to agree that the balance sheet needs to be reduced faster than in 2018, which is usually regarded as a policy error,” said Markus Allenspach, head of fixed income research at Julius Baer.

It is foreseeable that the first to lean against the wall are highly speculative technology stocks. Or, as Hani Redha, the portfolio manager of PineBridge Investments, said: “Spec-tech is collapsing.” There are early competitors in this year’s market offer.

The Nasdaq Composite Index, which is dominated by technology stocks, closed down more than 3% on Wednesday, its worst performance in nearly a year. Cathie Wood’s flagship exchange-traded fund, known for betting on unproven and unprofitable technology companies, continued its tragic operation, falling by nearly 10% this year alone. The world’s most speculative cryptocurrency was also hit hard, with Bitcoin falling nearly 10% to $41,450. Except for the weekend flash crash in early December, this is the lowest level since October.

Government bond prices have also been hit. As of 2021, the yield on the benchmark 10-year US government bond is only 1.5%, which is far below most forecasts. But they have swept about 1.75%. This inevitably weakens the relative attractiveness of long-term speculative investment.

All this laid the foundation for the tense tug-of-war between the Fed and fund managers this year. Mark Dowding, chief investment officer of BlueBay Asset Management, pointed out that in this process, the Federal Reserve’s information is carefully arranged.

“Last year, the Fed wanted to be very cautious about switching from super easing to more neutral. They didn’t want to disrupt the market and wanted to proceed with caution,” he said. “But recently it has been taking small measures to see if the market will throw its toys out of the stroller.”

After the Fed’s last decision, Christopher Waller, one of the central bank governors, firmly Planted The idea of ??raising interest rates began in March in response to “shockingly high inflation.” Toy inspection: still in the stroller.

Then in early 2022, just before the meeting minutes were released, and the stock index was still close to historical highs, the Wall Street Journal made some attempts at the ideas of policymakers. Report Officials are “starting to plan how and when” to shrink the central bank’s balance sheet. Once again, the toy stays in place.

“Facts have proved that the market is satisfied with the three interest rate hikes this year and the three interest rate hikes the following year. By the end of 2023, we will still only be able to reach 1.5%,” Dowding said.

Some bubbles have been blown to the side, that’s for sure. But the US benchmark Standard & Poor’s 500 index fell less than 2% this week is not enough to trigger the Fed to reflect on some terrible mistakes. Just as importantly, the decline we are seeing comes from extremely high levels.

If fund managers really start yelling, the Fed may still consider retreating. As suggested by Marcelli of UBS, the rules of the game remain the same: stick to periodic bets. “Growth companies have always been the main beneficiaries of extremely low real and nominal interest rates,” she wrote. “As the Federal Reserve begins to normalize policy, it is logical that these stocks will face the strongest headwinds. In the US stock market, we continue to prefer value stocks over growth stocks.”

Growth enthusiasts who haven’t figured this out will have to learn to speak up.

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