Consider this roller-coaster ride: Stocks closed the month on a hot streak, with the S&P 500 notching its best two-day rally since 2020. But for the month as a whole, investor jitters about inflation and the Fed raising interest rates sank the benchmark by 5.3%, its worst one-month performance since March 2020. Another data point: Following Wednesday’s Federal Open Market Committee (FOMC) meeting, the S&P fell into correction territory but pared nearly half of those losses in recent days.

This Jekyll-and-Hyde showing played out across the globe.

“The biggest story came from central banks, and the Fed in particular, which continued to move in a much more hawkish direction and signaled they would begin to raise rates at their next meeting in March,” Jim Reid and Henry Allen, thematic research strategists at Deutsche Bank, wrote in an investor note on Tuesday. “But other themes including geopolitical tensions over Ukraine also served to dampen sentiment, sending global equities to their worst month since the pandemic began.”

Pulling up the rear were tech stocks, and in particular loss-making "growth stocks" with lackluster cash flow. Think Robinhood, Peloton, and Zoom Video Communications. On the winning side, investors jumped back into Chinese equities, which took a beating last year, and the big-caps in London's FTSE 100. The latter is weighted more heavily to energy and finance stocks, two sectors that outperformed the pack in January.

Crypto clobbered

The crypto and commodities picture was volatile too. Crude had another huge month, a factor that will almost certainly push inflation higher for the foreseeable future. The dollar, too, had a stellar January. The greenback rose by 0.9% in the month, a huge move by FX standards. A strong dollar is often seen as a headwind for stocks that do a lot of business overseas.

Finally, crypto bulls had another rough month. Ethereum's Ether, Bitcoin, and Dogecoin fell further in January, wiping billions off the value of these closely watched crypto assets. At $38,325, Bitcoin was trading close to 20% below its 200-day moving average, a six-month low, on Tuesday morning.

For the month ahead, Wall Street pros continue to advise caution. The markets are factoring in a more hawkish Fed that could hike rates at one of the fastest clips in recent memory. Such rapid tightening leaves little margin for error.

"While we now have more clarity on the central bank’s new policy, its success is far from assured," warns Lisa Shalett, chief investment officer at Morgan Stanley Wealth Management. "Given the extent to which policymakers are behind the curve and the complex crosscurrents that the business cycle faces, probabilities are rising that tightening could exacerbate economic slowing that might already be underway. It’s also possible that the Fed’s moves fail to quell inflationary forces, heightening price expectations. Either of these scenarios suggest higher risk premiums for both stocks and bonds, which means lower valuations and higher volatility."

She advises investors to hold fire. "Build cash for opportunistic deployment later."