What’s going on in US financial markets? And how will regulators react?

After years of gravity-defying increases, global equity markets have started 2022 with a thud, rattled by high inflation readings in many major economies, Russia’s provocations against Ukraine. The iShares MSCI World ETF is down 7% YTD, and sharp intraday market swings recall the volatility of the 2007-08 Global Financial Crisis. 

With leverage high and the world’s major central banks pivoting from supporting asset values to combating inflation, policymakers must start to ask questions about financial stability, systemic risk and consumer protection that have been left unasked for some time amidst the generally economy and market performance, even amidst the covid-19 pandemic. How will financial regulators and policymakers react?

We were joined by:

• John Fagan, former Director of the US Treasury’s Markets Room
   
• Brendan Walsh, an experienced macro analyst and John’s partner at DC-based research firm Markets Policy Partners, to get a sense of what’s going on in the markets, and discuss the implications for US policymaking
   
• Rebecca Park, Senior Practice Lead for Financial Services
   
• Erin Caddell, Director and President of Global Counsel USA in Washington, DC

They discussed: 

• What is driving the current market volatility, and how long can we expect it to continue?
   
• What might the reaction be from key agencies in the US, EU and UK, particularly if the current volatility presages sustained weakness in the global economy and financial markets? How might the reaction of bank regulators differ from the approach of more consumer-focused agencies?
   
• How does the sharp recent selloff in Bitcoin and other cryptocurrency assets factor into regulators’ views? How is the regulatory regime around this fast-growing and volatile sector likely to evolve in terms of consumer protection and market structure?