Dow falls 200 points as the Fed prepares to raise interest rates

One investor told Yahoo Finance that Wall Street can expect to see even more volatility ahead as the Federal Reserve gears up its first rate hike campaign of the pandemic era.

The Dow dropped 200 points Friday as markets closed out of a volatile week with its second weekly loss in a row. He said that as long as the Federal Reserve is on track with the interest rates that we're now expecting -- moving from maybe three interest rate hikes this year to four we still think it's going to be a risk-on market.

This week capped off a somewhat disappointing start to the year for investors, just as the fourth quarter earnings season gets underway. The retail sales fell by the biggest margin in the past ten months, dampening the economic prospects, according to the economic survey data released by Bloomberg.

The consumer price index, released Wednesday by the Bureau of Labor Statistics, showed a 7% surge in headline prices in December.

As a way to control high inflation, the Fed has said that they will be raising rates, which markets expect will happen three times this year. Inflation is running hotter than expected, and an increasing number of experts think that more tightening is in the offing.

In a note released Sunday, Goldman Sachs GS chief economist Jan Hatzius wrote that the labor market slack has made Fed officials more sensitive to upside inflation risks and less sensitive to downside growth risks.

He added that there were three hikes in March, June and September and a hike in December for a total of four in 2022, as well as a hike in December.

The Federal Reserve Bank of St. Louis President James Bullard said that a March rate rise is very likely due to high inflation. He told the Wall Street Journal that he thinks we should go to four hikes in 2022.

Gilbert said that the turbulence in January may only be the beginning of a volatile year as markets adjust to the rapidly spreading Omicron variant and take higher rates into account.

She said it's a matter of riding that bull. It's going to be a wild ride, and there will be people who are thrown off the bull and who is going to stay on the bull. Follow him on Twitter IFanusie.

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