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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