For Investors, 2022 Is Turning Into A Test

Published Friday, May 6, 2022 at: 7:18 PM EDT

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It’s been easy being a buy and hold investor. Until now.

Stock market investments, as measured by the Standard & Poor’s 500 index, approximately doubled in value in the past five years. It was up 26.9% in 2021, 18.4% in 2020 and 31.5% in 2019, and it is 59.3% higher than at the bottom of the Covid bear market in March 2020. 

The stock market suffered another losing week and is in the throes of the longest weekly losing streak in over a decade. Here’s what investors need to know.

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The Federal Reserve raised its policy rate by a half-percentage point on Wednesday for the first time since 2000, and Fed Chairman Jerome Powell at a press conference Wednesday repeatedly said “inflation is too high.” He indicated that the central bank would raise rates by another half-percentage point in both June and July

Inflation is raging at its highest rate in 40 years.  Fed tightening has increased investor nervousness that the Fed would raise rates too much in the months ahead to tamp down inflation, and that it would end the two-year economic expansion. However, the Fed chairman also emphasized repeatedly at his press conference Wednesday, that the economy is nowhere near a recession currently.

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Friday morning’s job situation report brought good news. Employers added 428,000 jobs in April. The unemployment rate remained at 3.6%, and the number of employees is nearly fully recovered from the peak reached during the last expansion before the pandemic struck.    

The Institute for Supply Management (ISM) index of manufacturing activity in April was 55.4 and, more importantly, the ISM’s index of purchasing manager activity stood at 57.1. While both indexes have cooled from a boil in the past year, they are both nowhere near the reading of 50 that would indicate a recession might be near.  

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The Standard & Poor’s 500 stock index closed this Friday at 4,123.34. The index lost -0.57% from Thursday and is down -0.21% from last week. The index is up +59.3% from the March 23, 2020 bear market low but down -15.1% from the January 3, 2022 all-time high. 


Nothing contained herein is to be considered a solicitation, research material, an investment recommendation, or advice of any kind, and it is subject to change without notice. Any investments or strategies referenced herein do not take into account the investment objectives, financial situation or particular needs of any specific person. Product suitability must be independently determined for each individual investor. Tax advice always depends on your particular personal situation and preferences. You should consult the appropriate financial professional regarding your specific circumstances. The material represents an assessment of financial, economic and tax law at a specific point in time and is not intended to be a forecast of future events or a guarantee of future results. Forward-looking statements are subject to certain risks and uncertainties. Actual results, performance, or achievements may differ materially from those expressed or implied. Information is based on data gathered from what we believe are reliable sources. It is not guaranteed as to accuracy, does not purport to be complete, and is not intended to be used as a primary basis for investment decisions. This article was written by a professional financial journalist for Advisor Products and is not intended as legal or investment advice.

This article was written by a veteran financial journalist based on data compiled and analyzed by independent economist, Fritz Meyer. While these are sources we believe to be reliable, the information is not intended to be used as financial advice without consulting a professional about your personal situation.

Indices are unmanaged and not available for direct investment. Investments with higher return potential carry greater risk for loss. Past performance is not an indicator of your future results.

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