The Informed Investor

Market Volatility and Financial Security in 2022

March 3, 2022

As the U.S. slowly emerges from the COVID-19 pandemic, the U.S. economy, and the markets are in far better shape than many predicted given all that we’ve been through. However, just as the nation seemed poised to embrace fewer restrictions on commerce and rapidly declining cases of coronavirus, the war in Ukraine began in earnest. As of this writing, the conflict in Eastern Europe is ongoing, and much remains to be seen about the impact this will have on U.S. and global markets. Here we provide thoughts about factors that may play a role in market volatility and financial security in 2022.

Inflation Concerns

Inflation is at 40-year highs, with no sign of relief in sight. Even though interest rate hikes are expected this year, their impact on inflation will not be immediate. As of this writing, it is difficult to imagine energy prices declining as numerous countries are imposing some of the most severe sanctions in history on Russia.

Stock Market May Be a Bumpy Ride

The stock market has been erratic in the early part of 2022, after almost a year of extraordinary gains. So far this year, there are some indications that stocks may enter correction territory. In late January the Nasdaq fell nearly 15%, and the S&P lost approximately 10%. At the end of February, the Dow Jones is down approximately 7% since the start of the year. However, there continue to be few signs that we’re heading for a drastic market decline.

Rising Interest Rates

The Fed has been widely expected to raise interest rates several times throughout the year to combat rising consumer prices. Some were expecting significant increases and/or more than half-dozen rate hikes throughout the year. At ICC, we continue to believe that the Fed will raise rates in 2022, but the rapid escalation of the war in Europe, and the subsequent rise in energy costs may lead the Fed to be more conservative or implement fewer hikes.

Global Conflicts Can Increase Volatility

Global conflicts, particularly with a nuclear power such as Russia often spook investors. It is also likely to continue to strain supply chain issues. As such, inflation may rise even higher.

Fiscal Policy

With the president’s Build Back Better plan currently dormant, a revised package will be unveiled at some point. However, the revisions to the package are currently unknown, so the potential impact on market security remains to be seen.

Slow Growth

We are experiencing very low levels of unemployment which is a key indicator of a healthy market. However, we do expect a slowing of growth this year. After ending 2021 with the economy growing at its fastest pace since 1987, it is unlikely to continue throughout 2022. The slowing of the growth may even be abrupt, as the Fed ceases to provide the same levels of fiscal support seen during the peak of the pandemic.

Review Your Portfolio Regularly With Your Financial Planner

The best way to ensure financial security in 2022, is to meet regularly with your financial advisor to review your retirement plan and investment portfolio. At ICC, we meet with our clients quarterly to review their portfolio, their financial needs, and any changes in their goals.

If you have $1,000,000 or more in investable assets and would like to put our investment management expertise to work for you, contact us today at (702) 871-8510. ICC’s CEO, Randy Garcia, has been ranked by Barron’s as one of the Top 100 Independent Advisory firms for eight consecutive years.

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