the NASDAQ Composite seems to be on a roller-coaster ride. It was as low as 6,880 points in March 2020 in the wake of the COVID-19 pandemic and jumped as high as 16,212 points in November 2021 when the lockdown and restrictions were eased. It dipped again at the start of 2022 and went as low as 15,833 points. In the mid of March 2022, the intraday recorded a steep fall of 20.5 percent to 12,581 points. It is nerve-wracking volatility and has rarely been witnessed in the past decade or more.
Inflation is on a speedy rise in the United States and all the attention is now on the Federal Reserve as well as how it will handle the situation. If inflation rises further, the NASDAQ growth may become constricted by cheap debt.
Simultaneously, the United Kingdom is facing a steep rise in the inflation rate and the Bank of England is tasked to keep it under control through revised policies. The US Fed Reserve is to follow the same to maintain the inflation rate of the Consumer Prices index at 2 percent.
Labor Department reports the annual inflation rate in the US was 7.9 percent in February 2022 and it was at the highest level since 1982 when Argentina invaded the Falklands. The cost of food, energy and shelter is rising at a rapid pace. This is politically dangerous for President Biden as the mid-term elections are scheduled to be in November this year. The poorer Americans will be hit hard due to fewer disposable incomes.
It is expected the Fed may increase the interest rates by 25 basis points this month and further in the coming months if the Russia-Ukraine conflict continues longer. The economic outlook has become uncertain. The price of gasoline has moved upward by 38 percent in the period of the past 12 months.
Economists and market analysts believe the crisis in Ukraine may leadinflation to soar further. The commodities including Nickel, Aluminum, Palladium, Gold and Wheat are at the highest levels in the past several years due to sanctions and blockades. The exports of these have been highly restricted from the war-torn region.
The Western allies have imposed several sanctions on Russia including a ban on the imports of oil and gas as well as the removal of Russian banks from the SWIFT payment platform.
Meanwhile, the Russian assaults have destroyed several key cities and towns in Ukraine leaving millions of citizens to flee to neighboring countries to seek refuge.