From inflation to war, these four factors are affecting markets and the economy

This week, people who went to the Future Proof event in California said that the markets and economy are being affected by inflation, interest rates, a strong dollar, and the war in Ukraine.

At least four big trends that are affecting the economy and stock market right now are making things hard for investors right now, market experts and investment strategists said Monday at the Future Proof wealth conference.

Barry Ritholtz, chief investment officer and chairman of Ritholtz Wealth Management in New York, said that these high-level trends are inflation, the Federal Reserve's interest-rate policy, the strength of the U.S. dollar, and the Russian invasion of Ukraine.

Anastasia Amoroso, managing director and chief investment strategist at iCapital Network, said, "The macro environment is uncertain right now."

"This has been going on for nine months, and what have we really learned?" she asked, adding that inflation is lasting longer than expected.

Since March of this year, the Federal Reserve has steadily raised interest rates on loans to bring down inflation that has been too high for too long.

Officials at the U.S. central bank have changed their plans for how quickly and how much they will raise the Federal funds rate, which is the benchmark interest rate, to reach their goal.

Michael Arone, chief investment strategist for the U.S. SPDR business at State Street Global Advisors, said that this "moving target" has been the biggest problem this year because of how volatile stock prices have been.

The war in Ukraine has also affected the prices of energy, food, and other goods around the world.

And, compared to currencies like the euro and the British pound, the U.S. dollar is stronger than it has been in decades. Arone said that this strength can "act as a headwind in many ways." He said that a strong dollar can hurt the earnings of companies in the S&P 500 Index because about 45% of their income comes from outside the U.S. Goods from other countries may become cheaper, but goods from the U.S. may become more expensive for other countries to buy.

The Federal Reserve, meanwhile, is trying to achieve a "soft landing," in which higher borrowing costs slow the economy and keep consumer prices from rising too quickly, but don't cause a recession or a lot of joblessness.

Fed officials have said many times that this is a hard job, but Amoroso thinks the central bank is on its way to doing it.

Trying to figure out "the inflation puzzle"

"We're starting to figure out what's going on with inflation," she said.

She said that the U.S. gross domestic product is slowing down, but it is not "falling off a cliff." She said that since energy prices are going down, so should food prices over time. (The cost of transporting food is partly reflected in its price.) Amoroso said that consumers are also starting to complain to companies about higher prices for airline tickets, food, and other things.

She also said, "I think it's getting harder and harder for companies to justify price hikes."

"The economy is not the market, and the market is not the economy," Arone said.

As investors look forward to better times, the stock market will often start to price in an economic recovery long before economic data shows a bottom. For example, during the pandemic, the stock market hit rock bottom on March 23, but it quickly went back up, even though the world was in the middle of a health crisis.

Arone said that investors who are worried about a recession should buy assets that do well in the early stages of an economic recovery. He added that these include value stocks, small-cap stocks, and industry sectors like energy, industrials, and financials.

Amoroso also said to buy "when it feels awful to do so" as a general rule.

"As bad as things felt, and maybe still do, it makes a lot of sense to buy things when they are on sale," she said.