After a historic year for stocks and the economy, LPL Financial Chief Market Strategist Ryan Detrick looks at three potential worries in 2022.
You can’t understate the influence of the monetary and fiscal policy during this recovery. Both are going to take a back seat in 2022 as the economy ages, so that is one major tailwind that is slowing. The Fed is widely expected to start raising interest rates this year, which historically doesn’t end bull markets, but could absolutely add to market volatility.
The economy is expected to grow at more than 4% in 2022, which would still go down as one of the better years in recent memory, but the worry is this is slowing from 2021’s 5% plus year. Markets are always looking ahead and slowing growth is a perfectly normal part of an economic cycle, but one that could add to potential worries if new variants, stubbornly high inflation, or supply chain issues slow growth more than expected.
The S&P 500 Index has officially doubled from the December 2018 lows and has gained 29%, 16%, and 27% the past three calendar years. Although we still expect the bull market to remain, investors should be open to small gains and more volatility along the way. Don’t forget, this is a midterm year, which tends to be the most volatile out of the four-year cycle and something we expect could take place once again this year.
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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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