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It has been a rough start to 2022, with many stocks down significantly. This week in our latest LPL Market Signals podcast, Ryan Detrick and Jeff Buchbinder discuss the rough start to this year, what is needed for a low to form, and the upcoming Federal Reserve meetings.

Dissecting the start of 2022

We expected some volatility this year, but we didn’t think it would be all at the start of the year. Ryan notes how this year saw the S&P 500 Index down 10% (on an intraday basis) nearly faster than any other year in history. Jeff adds that with the Federal Reserve hiking rates and an aging economy, more volatility shouldn’t be a huge shock, just that it happened so soon is uncomfortable. Ryan mentions that the S&P 500 Index averages a 10% correction once a year and we haven’t had one since early 2020, so we are likely due.

What is needed for a bottom

The strategists both agree that sentiment is flashing contrarian signals. From texts from family and friends, to huge volume, and big spikes in bears in sentiment polls, we could be nearing a major low. Ryan was impressed with how well crude oil has held up, which suggests that global demand is still strong. Earnings season is strong and the corporate backdrop is healthy according to Jeff as well. Lastly, they discuss that early in a midterm year stocks tend to be weak, which is playing out a little too well as Jeff noted.

Fed meeting preview

It is widely expected that the Fed won’t increase interest rates at this meeting, but likely will in March. Jeff says he didn’t expect too many curveballs from the Fed this week, as they will likely stick to the recent narrative that higher rates are needed to combat inflation, but the economy should be strong enough to withstand higher rates. Ryan and Jeff also note that rate hikes take place more mid-cycle, and we still expect the economy to grow this year and future growth should last (at least) a few more years.

Tune in now

Listen to the entire podcast to get the LPL strategists’ views and insights on current market trends in the US and global economies. To listen to previous podcasts go to Market Signals podcast. You can subscribe to Market Signals on iTunes, Google Podcasts, or Spotify and find us on the LPL Research YouTube channel.

 

IMPORTANT DISCLOSURES

This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of principal. Any economic forecasts set forth in the podcast may not develop as predicted and are subject to change.

References to markets, asset classes, and sectors are generally regarding the corresponding market index. All indexes are unmanaged and cannot be invested into directly. Index performance is not indicative of the performance of any investment and do not reflect fees, expenses, or sales charges. All performance referenced is historical and is no guarantee of future results.

Any company names noted herein are for educational purposes only and not an indication of trading intent or a solicitation of their products or services. LPL Financial doesn’t provide research on individual equities. All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.

All index data is from FactSet.

All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.

This Research material was prepared by LPL Financial, LLC. 

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