Courtesy Sterling Manor Financial LLC
By Stephen Kyne
The year 2022 was an incredibly difficult year for the economy and the markets. In fact, it was the worst year for U.S. stock markets since 2008. Rapidly rising interest rates meant that there were few places to hide as an investor, since even fixed income funds sank due to interest rate pressure.
The S&P 500, the most broadly used US index, ended the year down 20 percent, while the NASDAQ suffered a 33 percent loss, according to FactSet. You’ll be in good company if you open your December statement and find that your balance dropped in 2022.
Down years happen, and it’s something that every investor must accept. The question is: Where do we go from here?
We think that the economy and markets will be impacted by several factors. The first of which will be the continued raising of interest rates by the Fed.
Caught flat-footed in early 2022, the Fed began a rapid series of interest rate increases in a desperate attempt to rein in rampant inflation, which resulted from the wanton subsidies and stimulus of the government’s pandemic response. Since interest rates are essentially the price of money, raising them should slow down economic activity, although it can be a messy and very imprecise process.