“That was rough.” Watching the Kansas City Chiefs fail to kick a field goal at the end of the first half of the AFC Championship game and then lose by 3 points. Yeah, that was rough.
The stock market finished January with its worst month since March 2020 when the pandemic was just beginning.
The stock market hates uncertainty, and the first month of this year was ripe for uncertainty. Currently, we have the Federal Reserve’s upcoming rate hikes, crazy high inflation, the pandemic or fear of the pandemic disrupting the economy, supply chain mess, less than impressive corporate earnings so far, and now Russia bullying Ukraine. That’s a lot of uncertainty.
What were the January numbers? The Dow Jones, which are 30 blue-chip stocks, which had some intraday swings of 1,000 points finished January negative 3.3%. The S&P 500, the top 500 companies in America, was negative 5.3%. The Nasdaq, which is mostly technology stocks, was negative 9%. (according to the New York Times Gandel & Marcos article 01/31/22.)
The stock market had a rough month. The fancy financial word for rough is “volatility’ but the word “rough” better describes this past month. The volatility was mainly because of our central bank, the Federal Reserve, which has artificially propped up the stock market by keeping interest rates near zero while at the same time Americans are struggling with the highest inflation in 40 years. What concerns investors is the fix for inflation could also hurt stocks. By raising interest rates the Fed could possibly slow inflation, but that same rise in interest rates could also slow the economy which would hurt stocks.
Corporate earnings seem strong and the American consumer is financially healthy with cash in hand to keep buying. I also think inflation will normalize in the next year or two, but between now and then I think the stock market will be more volatile than usual.
The Chiefs had a great season but it was a disappointing way to lose. It seemed like we “shot ourselves in the foot.” Kind of like the Fed. Hopefully good days are ahead for the Chiefs and the Fed.
Have a blessed week!
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
Securities and advisory services offered through LPL Financial, a registered investment advisor, Member FINRA/SIPC.