US (Washington Insider Magazine) – The stock market has disregarded the harsh realities many Americans have faced, despite the ongoing pandemic. Thanks to the many safety net policies put into place by the government during the Covid-19 crisis, the stock market was able to not only stay afloat but thrive during a time when most people were losing loved ones, their health, and employment. However, that stroke of good fortune may soon come to a halt in 2022.
With new government contingencies and stimulus funding ending, the Federal Reserve is expected to raise interest rates to help combat inflation causing investment behavior to become more erratic in the coming year.
While investment portfolios are projected to be shoddy in 2022, there is some good news for the average consumer. Analysts at J.P. Morgan are expecting the 6.8% inflation rate to regress to the mean as well as minimal effect on economic growth due to Omicron.
The S&P 500 had 2021 for the ages, rising 25% on top of the 16% gains during 2020. The S&P hit 70 new closing highs, the most in nearly 27 years (there were 77 in 1995).
The S&P also set a new record on January 7, the day after the Capitol was famously attacked by a mob of Trump supporters. Millions of amateur investors were driven to the market as well during the lockdown because many were stuck at home with nothing better to do than snag up shares of various companies, even those not expected to bring returns.
However, with recent tension between the U.S. and China, the markets remained optimistic about future business prospects between the two powers. Despite multiple variants of COVID and death tolls in the millions around the globe, the market’s growth was not stunted. Coincidentally each new panic was met with subsequently quicker recoveries.
The past year did seem to be the year for new stock offerings, but investors were quick to sell these new holdings. There were 400 private companies that raised a total of $142.5 billion in 2021, but the Renaissance IPO exchange-traded fund, which tracks initial public offerings, is down 9% for the year. As a prime example of this trend, Oatly’s shares in May, when it went public, soared 30%, but are now sold at 60% lower than the opening-day closing price.
In fact, the second half of 2021 was when the writing seemed to be on the wall for the stock market’s rare hot streak. This is when household goods and gasoline prices soared supply chain issues caused by the pandemic marred the availability of products, and businesses trying to get back to normal operations had to raise wages to recruit and retain workers. Consumer prices escalated 5.7% making this the fastest pace in 30 years!
Overall, 2022 is expected to be a bit of a bumpy ride because the investments are not going to return at the same rate it did in the past 2 years.
