Categories
Equity markets headed back to earth in recent months after rallying sharply through mid-summer. High interest rates and inflation are becoming the new norm. A soft landing remains a plausible scenario but there is more uncertainty today as Fed tightening continues to work its way through the system.
Defying most expectations, the stock market has moved higher this year, even as inflation remains elevated, and the Fed pursues its most aggressive rate-hiking campaign in four decades. Hope for an economic soft landing has emerged among investors, leading many to anticipate better days ahead.
A prolonged period of ultra-low interest rates encouraged complacency and risk-taking across financial markets and the broader economy. There had to be payback. Now, as policymakers ramp up rates to combat inflation, some vulnerabilities have risen to the surface, most recently in the banking sector.
It would be an understatement to suggest that 2022 proved a difficult year for investors.