Tech Sector Turmoil and the Bear Market

This week, Craig Siminski, of CMS Retirement Income Planning, shares an article discussing factors that have been driving market volatility and providing perspective to help investors make sound portfolio decisions:

During the intensely volatile first 100 trading days of 2022, the stocks of companies in the S&P 500 index delivered their worst performance since 1970. The S&P 500 continued to tumble, and the benchmark index descended into a bear market — typically defined as a sustained drop in stock prices of at least 20% — on June 13th, 2022.

When the market closed, the S&P 500 had dropped 21.8% from its January 3rd peak, and the tech-heavy NASDAQ, already in bear territory, had plunged 32.7% from its November 19th, 2021, peak.

Some investors who are nervous about the future and their portfolios seem to have taken a defensive stance by selling riskier assets, including investments in growth-oriented technology stocks.

What’s Triggering Market Volatility?

Throughout 2021, U.S. businesses dealt with unpredictable demand shifts and supply shocks related to the pandemic, but near-zero interest rates and trillions of dollars in pandemic relief supported consumer spending, boosted economic growth, and drove record corporate profits. Companies in the S&P 500 posted profits in 2021 that were 70% higher than in 2020 and 33% higher than in 2019, which helped fuel a stock market total return of nearly 29%.

But in the first months of 2022, investors began to worry that tighter monetary policies by the Federal Reserve — intended to cool down stubbornly high inflation — would stifle economic growth and cause a recession. Prices began rising in the spring of 2021 due to high demand, supply-chain issues, and a labor shortage that pushed up wages. Inflation picked up speed in early 2022 when…

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Craig Siminski is a CERTIFIED FINANCIAL PLANNER™ professional, with more than 25 years of experience. His goal is to provide families, business owners, and their employees with assistance in building their financial freedom.

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