Yesterday the Fed announced at 50 bp interest rate increase and the start of a monthly reduction of its balance sheet - ie quantitative tightening (QT). I strongly believe that QT is far more important and impactful for markets than raising rates. It will drain liquidity, the very oxygen of markets that today are highly dependent on plentiful and cheap liquidity to "carry" financial assets on borrowed money.
The following chart makes things clear: notice how in 2020 the stock market (red line) soared at exactly the same time as the Fed pumped its balance sheet to record highs (blue line). Pandemic fears made no difference: the torrent of money raised equity prices, regardless.
Is it now time for a reversal? I think so, depending on how committed the Fed is on killing the inflation itself has brought upon us all by the self same money torrent. Again, I don't think the Ukraine-Russia war has any real significance in all of this.. it's all about money. Predictably, share prices have eased off their highs well in advance, discounting the Fed's actions.
The only remaining question, therefore, is how tight will the Fed get? Again, in my opinion, it won't ease off any time soon; the process will drag on, possibly for years instead of months.