Monthly Market Update:
Recap of January 2022
The market got off to a rocky start this year. Part was due to inflation concerns and a lot due to the Feds comments on interest rates.
To start, I am sure if you looked at your investment account or just the overall market, you saw a lot of red during January. The markets opened the year with a downward trend, though the last few days of January provided some much-needed relief.
The stock market fell into correction territory, which means the market fell at least 10%. To soften the blow, you do have to realize we must look at long term averages and the overall stock market has far surpassed its average return over the past few years, though nobody ever wants to see their money go down.
To provide a bit more context on the correction, let’s look at history. I’ve touched on this before so if you generally read or watch the video each month, this may look familiar.
According to Schwab, the stock market had 10% or more pullbacks in 11 of 20 years from 2000-2019. Though the market pullback occurred 11 times, only 5 of the past 20 years actually saw a negative return. That said, it is quite common for dips to happen and more common for the stock market to recover and finish positive for the year.
Now, why did the market get knocked down? Inflation and supply chain issues continue to be a problem, though I feel that story has been playing like a broken record. The big issue is what the Fed will do about inflation and they have said they will be raising interest rates very soon. Each time the Fed talked in January and mentioned rates, the market responded by throwing a tantrum like a two-year-old who just got their toy taken away.
It’s not all bad news though. The US economy continues to show signs of strength. That said, the stock market reacts emotionally at times and emotions with investing leads to bad decisions. My job is to help you understand the market, but also to lean on a financial plan instead of attempting to predict the day-to-day swings of stocks.
For the January numbers, the S&P 500 finished -5.17%, the Dow -3.24%, Nasdaq -8.96% and the Barclays Aggregate Bond Index -2.15%
I appreciate you taking the time to read this update. If you have any questions please reach out.