The International Monetary Fund has warned of more market sell-offs as central banks attempt to combat higher inflation and ease back on pandemic stimulus measures.
Market players started 2021 on an optimistic note, predicting some economic momentum amid the easing of COVID-19 restrictions, which would likely boost stocks.
However, since Russia invaded Ukraine, that outlook has worsened, giving supply chain shocks and higher energy prices. “There is certainly a risk of further sell-offs,” Tobias Adrian, director for monetary and capital markets at the IMF, told CNBC.
“The intended consequences of monetary tightening is to tighten financial conditions to slow down economic activity, and I would not be surprised if we were to see a certain amount of readjustment of asset valuations going forward, and that could be in equity markets as well as in corporate bond markets and sovereign markets,” he added.
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