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Wednesday, May 11, 2022

Why the U.S. stock market is tumbling in 2022

The US stock market is set to begin in 2022.

The S&P 500, widely regarded as a major U.S. stock market performance, fell 13.3% in April, a sharp four-month decline from any year since 1939. The index continued to decline in May and fell by 16%. as of the end of Tuesday, it is approaching 20% ​​of some investors who think it is a bear market guarantee.


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For the Nasdaq Composite, the heaviest in stocks, the decline has been the worst, down 25% so far this year.

WHAT IS STOCK BASED ON THIS YEAR?


The S&P 500 started the year more than doubling from the low it reached in March 2020, a rise that has slowed almost immediately as the calendar turns to 2022.

A key feature for investors and market weakness analysts is policy change in the Federal Reserve. As the epidemic continues, the central bank of the United States imposes emergency economic stimulus policies that investors say have also encouraged the purchase of shares and other risky assets. But the Fed in early 2022 signed that it was trying to tighten monetary policy to reduce inflation, a major change in the investment climate.

WHY DID THE FED PIVOT HURT THE STOCKS?


The Fed in March raised interest rates for the first time since 2018, rising by 25 points. Earlier this month, the central bank raised prices by another 50 points - the biggest step in 22 years - and Fed Chairman Jerome Powell signed a similar increase could follow as he begins to release assets collected while fighting the effects of the epidemic.

Decisions are measured in stock in many ways. Although equity has risen over many previous Fed cycles of inflation, some investors are concerned that rising inflation and high commodity prices could force the central bank to tighten further, which could hurt growth and force the economy into a recession.

At the same time, strong Fed policy expectations have boosted the bond yield that was previously lagging behind. The US Treasury’s 10-year cash yield has already doubled this year to 3%, the first time above that level since late 2018, when the Fed reaches the end of its final consolidation cycle.

As yields increase, bonds are a more competitive investment in stocks, with Treasury's 10-year yield almost double the dividend interest rate of the S&P 500.

High bond products in particular undermine the lure of technology and other highly evolving sectors, which have high value for potential cash flows and lose their appeal as bond yields rise. Investors say the impact was reflected in the unpredictable decline in post-epidemic betting growth, with the Russell 1000 index dropping by 24% this year.

WHAT ELSE CAN YOU DO IN THE STORY OF THE SHOP?


Despite the Fed change, the Russian war in Ukraine has further fueled economic uncertainty. For example, unrest has created commodity shocks that have contributed to rising oil and other prices, and have caused some concern for the European economy.

Other factors that have contributed to the recent stock market crash include concerns about China's economy. Land closure to regulate COVID-19 affected the production process there.

WHAT SIGNS DO INVESTORS NEED TO STOP THE DEBT?


Investors would like to see indications that inflation in the U.S. is increasing so the Fed can back down from potentially aggressive actions. The release of the Wednesday April Consumer Price Index is the next important report you can look at.

Some investors look at technical indicators, such as whether the S&P 500 can hold key levels, such as 4,000, and the toughest days of volume losses to "wash" retailers, or the CBOE volatility index hits high.