From stocks to crypto to inflation, 2022 was not a fun year in money

If you started investing in mid-2020 or in 2021, that many people did – you probably had a good time. Stocks soared after the market crashed at the start of the pandemic. Crypto also took off. The meme stock craze driven by game stop and AMC was comically profitable for some, at least while the joke lasted. NFTs they were pretty completely made up, but hey, they were worth a lot of money. Y It’s not all made up moneyanyway?

The situation certainly felt Like a bubble, but it was a fun bubble to be in, so many bubbles are. It can feel like quite the party. It’s less fun when the bubble bursts… which is where we landed in 2022. The line that kept going up suddenly couldn’t stop going down.

It’s been a rough stretch for the economy in general. For stock market investors, major indices like the S&P 500, Dow Jones Industrial Average, and NASDAQ are set to end the year in the red. crypto winter is definitely here. The the housing market is in troubleand mortgage rates, which have been low for years, are rising. Inflation is at its highest point in 40 years, cutting into recent wage gains. The Federal Reserve’s fight against inflation by raising interest rates threatens to lay off workers and push the country into recession. Americans, as a whole, still have hundreds of billions of dollars in excess savings accumulated during the pandemic, but they are spend that money.

The whole thing about the Fed is that it’s supposed to remove the punch bowl just as the party starts. There are those who argue that she waited too long and everyone got too drunkor that it’s moving too fast and a lot of people are still completely sober, or that the punch bowl it’s not where the liquor is at all. In any case, it seems that the party, for now, is over.

It’s very easy to feel like a genius in a bull market.

The stock market race over the past decade or so overall it’s been pretty good. Although stocks plunged when the pandemic hit, they bounced back quickly: The market received a huge amount of support from the Federal Reserve and many people sank toes in daily trading for the first time. In some corners, it looked like investors couldn’t lose. The S&P gained 16 percent in 2020 and 27 percent in 2021. But this year, it has returned many of those gains.

That 2022 was a difficult year for stock market investors was not necessarily surprising, given the market’s gains in 2021, Sam Stovall, chief investment strategist at investment research firm CFRA Research, explained in an interview. “Any time the market rises 20 percent or more, we experience a decline of at least 5 to 10 percent, with the average being a 10 to 15 percent correction. This time, unfortunately, it ended up being a bear market,” he said, meaning a 20 percent drop. That expected decline has been exacerbated by some external factors that made it worse. “The Fed waited too long to start raising interest rates. We didn’t see the supply disruption unfold as quickly as many thought, and going into this year, the situation between Russia and Ukraine hadn’t [yet] it exploded,” Stovall added. is also a factor China’s continued tough stance on covidIt has economic implications around the world.

big tech stocks they have returned to earth after quite an impressive run. Investor interest in some of the weirdest things, from meme stocks to cryptocurrencies to NFTs, has waned and, in turn, so have their prices. In general, there have not been many places for investors to hide, even the regular shelter of the bond market was not certain.

“This is the first time in decades that both the stock and bond markets fell simultaneously. It created quite a bit of a shock for investors this year because there really was no place, not even gold,” said Jack Ablin, chief investment officer and founding partner at Cresset Capital. (The “bitcoin is a good inflation hedge” narrative also doesn’t seem to have been confirmed.)

It’s not necessarily a terrible thing that some assets whose previous valuations weren’t entirely justifiable return to a slightly more realistic level. Lots of people like their Pelotons, but the company was probably never really worth $50 billion. And for investors who remain interested in those assets, the lower prices could be an opportunity to buy. “Look, think of stocks and the stock market like any other commodity. Do you want to buy steak when it costs $18 a pound or do you want to buy that same steak when it costs $10 a pound?” Ablin said. “When the price goes down, it actually turns out to be a better deal.”

To be sure, there are no guarantees that markets won’t get worse before they get better. The Federal Reserve is about to continue raising interest rates in 2023, a move not exactly loved by investors. Stovall said he doesn’t see 2023 mirroring 2022, but that doesn’t necessarily mean we’ve hit bottom yet, either. In October, he asked a group of financial advisers if they had heard of their clients as “ringers,” the people who want to get aggressive when the market is up and sell just as it is bottoming out, only to make the wrong move in the wrong place. moment. They hadn’t. He told them, “Either they’re doing too good a job keeping you in tune and stuff, or we haven’t really seen the capitulation that we usually see at the end of a bear market.”

It’s the economy of inflation and we just live in it.

The main economic story of 2022 has been inflation. It’s loud, it’s persistent, it’s annoying. It has made everything else about the economy I feel very bad even when, according to many indications, there is many good things are happening, also. Wages are up, jobs are plentiful, and consumers, for much of the year, they have continued to spend.

Still, there is at least the risk of some dark clouds on the horizon. retail sales fell in the US in November, with declines in items such as furniture and motor vehicles. Inflation is bad, full stop. The steps the Fed is taking to try to rein it in could also lead to more evil, and make everything worse before it gets better. Loan interest rates are getting more and more expensive. People are putting more debt on your credit cards. If the Fed has its way, workers could end up losing their jobs, as the Fed has made it clear that it is looking for a slowdown in the job market.

“Despite the slowdown in growth, the labor market remains extremely tight, with the unemployment rate near a 50-year low, job vacancies remain very high, and wage growth elevated,” said the president of the Fed, Jerome Powell. said at a press conference in mid-December, noting that the US had added an average of 272,000 jobs per month over the past three months. “Although job vacancies have moved below their highs and the pace of job creation has slowed since the beginning of the year, the labor market remains unbalanced.”

“The medicine has the potential to be worse than the disease,” said Ira Regmi, manager of the Roosevelt Institute’s macroeconomic analysis program. They noted that this too will have a disproportionate impact. “Everything that happens in the economy happens at a faster rate and on a larger scale for black and brown people. They are the first to be fired, the last to be hired.”

The financial support provided by the government during the pandemic is now in the rearview mirror. Stimulus checks and expanded child tax credit money have been spent. For those who are out of work, unemployment insurance it goes back to the way it was before (read: a mess).

That does not mean that the government is not doing anything in the economy. Lindsay Owens, executive director of the progressive think tank Groundwork Collective, noted that the Inflation Reduction Law, approved in mid-2022, makes significant investments in areas such as climate and health care. “There’s a pretty substantial amount of long-term investment that’s just getting started that we’ll see for years, if not decades,” he said. Still, people aren’t going to feel that as immediately as a check coming in the mail. “Maybe a warning is that the sugar high is over,” Owens said. “The assignment is over, but the college fund is full.”

The fun is over, and it’s unclear if what follows is okay or a funeral.

There are plenty of reasons to feel better about 2022 than 2021, money-wise. The wide availability of Covid-19 vaccines means that the economy is back on track in many ways. Many of the supply chain issues that dogged the 2021 holiday season, for example, have been resolved. The labor market has recovered and many workers have found a unprecedented level of power and leverage.

Sure, it sucks if you lost money in the markets this year, but in general, the stock market usually goes up over time, actually, looking at your 401(k) it’s not going to do anything for you right now. It also sucks if you lost money in crypto, which, you know, it’s not so clear if it increases over time in general or not, especially depending on the coin. Many market insiders, and crypto folks, say these kinds of times are when some of the investments and companies that were junk in the first place disappear, which is generally not the worst thing in the world. They also say it’s good for new investors to know that prices can go down, even if they’re learning it the hard way. I guess if everyone decides that the cartoon jpeg monkeys probably weren’t worth hundreds of thousands of dollars, that’s probably okay.

Falling stock prices, high inflation, and rising interest rates aren’t fun, but perhaps the reason it feels like the party is over isn’t necessarily the current situation. Instead, it could be the general uncertainty of what lies ahead. It’s kind of hard to feel woohoo about anything when there is a threat of an economic downturn ahead. Fears of a recession are looming, depressing the current mood, regardless of each person’s individual financial situation.

“2023 could be a really painful year,” Owens said.

At best, the Fed designs a Soft landing and controls inflation without holding back the economy. At worst, it hits the brakes too hard, putting millions of people out of work and causing confusion for an indeterminate period of time. Wild cards remain: Russia-Ukraine, China and Covid, for example. Given what has happened in the last three years, who could begin to guess what’s next? Markets are like people in that sense: clearly anxious about the situation.

The party is on hiatus for now, but it’s good to remember that financial festivities probably won’t end forever.