High Crude Oil Spot Prices, Inflation Challenge Market Sentiment

May 20, 2022 14:58

High crude oil spot prices and inflation continue to challenge market sentiment as traders and investors enter the last month of Q2.  

Inflation in the UK reached 9 percent in April compared to 7 percent in March, meaning the Bank of England is likely to raise its key interest rate guidance at the next meeting in mid-June.  

The continued rise in the inflation rate even in a climate of higher interest rates poses the question: how high do interest rates have to go before they have an effect on inflation? There are special circumstances because of the COVID-19 pandemic distortions in the oil markets and geopolitical upheaval in Ukraine, so more time than usual may be needed.

The Federal Reserve is also expected to keep raising key interest rates as inflation appears to be outdoing the hawks' efforts to catch it in time.  

Meanwhile, supply-side fears harry the global oil markets and spot prices remain elevated.  

The challenges in the markets point to the need for traders and investors to make good risk management part of their strategies.  

Defensive stocks 

For investors in shares, this may mean diversifying into defensive stocks, so called because they have demonstrated stability in the most difficult market conditions. Read more about the definition of defensive stocks here

Those who trade CFDs on currencies, commodities and indices may have a stop loss on each trade to take volatility into account.  

Whether someone is a trader or investor or both, the market conditions could be called unusual to say the least. Because volatility is high, bearish conditions can quickly change into short-term uptrends and vice versa. Admirals free webinars provide plenty of expert tips from experienced traders to help navigate choppy financial waters.  

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This material does not contain and should not be construed as containing investment advice, investment recommendations, an offer of or solicitation for any transactions in financial instruments. Please note that such trading analysis is not a reliable indicator for any current or future performance, as circumstances may change over time. Before making any investment decisions, you should seek advice from independent financial advisors to ensure you understand the risks. 

Sarah Fenwick
Sarah Fenwick Financial Writer, Admirals London

Sarah Fenwick's background is in journalism and mass communications. She has worked as a correspondent covering Swiss Stock Exchange news and written about finance and economics for 15 years.