Ever since the pandemic hit the globe, economies have reached the brink of collapse. Many people found themselves out of a job and the value of assets took massive dips. Official bodies have tried hard to improve the condition of the market and bring it somewhat closer to pre-pandemic levels. However, it hasn’t been effective until now. Many finance pundits are predicting a global depression.
To control the impact of the pandemic and resuscitate the market, central banks are hiking up the nominal interest rate. However, one important thing to note here is that nominal rates do not matter that much to investors. Investors tend to base their decisions on real market rates, which are very low. They are at zero and even in the negative in some economies.
Investors are panicking
The trend that is emerging in the market is that of massive unloads of risky assets. In order to avoid huge losses, investors are making moves to unload risky stocks and assets. There is a clear difference between the path that rates will take and the current valuation by official bodies such as the Fed bank of the USA.
What experts are suggesting now is that policymakers try and avoid implementing policies that will make the market more volatile. At this time, ensuring financial stability in the market should be prioritized over everything else. From credit lines that are stretched thin to the predicted inflation that will ruin numerous lives, everything depends upon the policies that will be put in place.