As Treasury Secretary Janet Yellen sat down to testify before the Senate Banking Committee this week about the state of the financial situation in the United States, she assured the nation that the financial systems of the country were in place, even though the summer months would still prove volatile because of the ongoing ramifications from the pandemic explosion in China, as well as increased supply chain difficulties.
She also named the war on Ukraine as a continuing problem. “Russia’s unprovoked invasion of Ukraine has further increased economic uncertainty,” she said. “The U.S. financial system has continued to function in an orderly manner, though valuations of some assets remain high compared with historical values.”
This testimony before Congress, essentially a review of the Financial Stability Oversight Council’s December 2021 report, came in the same week that U.S. stocks sank again amidst their longest losing streak since mid-2011. Coupled with rising interest rates, and the unpredictability of the war, 2022 remains in the hot seat when it comes to the financial world. Experts expect the volatility to continue at least through the summer.
Local experts agree that the apple cart will remain upset for the foreseeable future. According to Adnan Zai, an Advisor to Berkeley Capital, “The Fed. has all but guaranteed 3 pts. before the end of the year, so the rates will certainly continue to rise to help mitigate the highest inflation in 40 years.”
Americans are certainly feeling the pinch of inflation at the gas pump, in the grocery store, and whenever they go to purchase a big-ticket item like furniture or an automobile. The price of raw materials continues to skyrocket, whether that be barrels of oil or lumber for a new house. The proliferation of Covid-19 and the lockdowns in China have made a difficult situation even worse, causing further supply chain disruptions that are reverberating throughout the entire world.
In addition to keeping their eyes on inflation, the Financial Stability Oversight Council also watches out for any new risks to the financial system. Currently, the Council has their eyes on the impact of digital assets. “With respect to digital assets, new products and technologies may present opportunities to promote innovation and increase efficiencies. However, digital assets may pose risks to the financial system,” she said.
Experts are worried about the volatility of digital assets, as well as the propensity for fraud. Because crypto assets are still fairly new, their trajectory cannot be fully understood as of yet. The council will continue to identify and manage risks brought about by “regulatory gaps” in this new frontier, even as the financial world grapples with how to approach these assets.
“Digital assets are becoming more common, and they can certainly be a game changer when it comes to long-term investments,” Zai said.
For now, it is safe to say that America should expect the unexpected. The supply chain cannot be mended in an instant, inflation is at a decades-long high, and digital assets are providing a new wrinkle. With a little luck and a whole lot of patience, the financial situation in the U.S. will settle down and balance out by the end of the year.