2022 was nothing but spectacular for the world. Long gone are the days where the Fed would “print unlimited” money just to boost or sustain the economy’s growth.
The inflation spike of 2021-2022 is a time of significant economic inflation driven mostly by supply constraints caused by the COVID-19 epidemic and the Russian invasion of Ukraine, along with strong consumer demand. As a result, several nations throughout the world have seen their greatest inflation in decades, prompting central banks to raise interest rates.
Let’s uncover some of the key economic information we have been through in 2022:
- January CPI Report. The consumer price index for January, which measures the costs of dozens of everyday consumer goods, rose 7.5% compared with a year ago, the Labor Department reported Thursday.
- Russia invasion of Ukraine. On February 24th, 2022, Russia invaded Ukraine in a major escalation of the Russo-Ukrainian War that began in 2014. The invasion caused Europe’s largest refugee crisis since World War II, with more than 9.1 million Ukrainians fleeing the country and a third of the population displaced.
- The Federal Reserve raised rates by .25%. After keeping its benchmark interest rate anchored near zero since the beginning of the Covid pandemic, the policy making Federal Open Market Committee said it will raise rates by a quarter percentage point, or 25 basis points. This move is to correspond with a hike in the prime rate, which will send financing costs higher for consumer borrowing and credit.
- The Fed raises interest rates by half a point (0.50%). The Federal Reserve on Wednesday raised its benchmark interest rate by half a percentage point, the most aggressive step yet in its fight against a 40-year high in inflation.
- Inflation rose 8.3% in April from a year ago. The Bureau of Labor Statistics reported Wednesday that inflation rose again in April, continuing a climb that has pushed consumers to the brink and is threatening economic expansion.
- The Fed raises rates by 75 basis points (0.75%). The Federal Reserve on Wednesday launched its biggest broadside yet against inflation, raising benchmark interest rates by three-quarters of a percentage point in a move that equates to the most aggressive hike since 1994.
- Inflation rose 9.1% in June. Shoppers paid sharply higher prices for a variety of goods in June as inflation kept its hold on a slowing U.S. economy, the Bureau of Labor Statistics reported Wednesday. This 9.1% rise was marked as the fastest pace of inflation going back to November 1981.
Looking at the big picture, we can see a slight dip in 2022 compared to the rich history of the S&P 500. We all know that, in the long term, the stock market tends to increase. This could be mainly due to several factors such as: population growth, economic growth, inflation as well as the best 500 companies which made up the S&P 500.
We have seen countless people who try to time the market and fail miserably. There is countless research out there which shows how Dollar Cost Averaging is a much superior strategy than Timing the Market. This is because no one really knows where the bottom of the market is. Thus, we can’t accurately predict the market.
If you were to ask whether the stock market will fall further from where we are? No one knows.
A simple quote by Nick Murray, “Timing is a fool’s game, whereas time in the market is your greatest natural advantage.” Essentially, what Nick Murray preaches is that time in the market beats timing the market.