The markets have been extremely volatile towards the end of 2018 and beginning of 2019. It has been widely assumed that the sell-off in the Dow Jones and other indices has been caused by tensions between the United States and China. Markets worldwide have been affected – including the Australian, Japanese and London stock markets. Another possible cause is the Fed’s view on interest rate hikes.
On Friday, Fed Chairman Jerome Powell said that the Fed had no preset path towards hiking interest rates. He added that they were constantly monitoring markets, and would respond as required. Moreover, the Fed is ready to shift its stance aggressively based on the market, similar to 2016, when four rate increases were expected but only one was implemented.
The S&P 500 index climbed 38% since election night in 2016 to the market peak during September 2018. However, rising tensions between the US and China and the Fed hiking interest rates sparked the sell-off through Q4 2018.