Yesterday we talked about the historical reasons why the stock market might get weaker this year. If you missed that out then just FOLLOW THE LINK if you are interested to read that article.
But let’s not stretch that out for much longer and talk about the reasons which I think are relevant for today.
1) Federal policy probably won’t be as easy.
If you followed the economy field last year then you will know that the Feds to keep the economy from going into a circle run had cut its benchmark interest rate to very close to zero. And the Feds also buying back very large amounts of government bonds.
The reason behind this was that bond yields had moved the very opposite way as the prices to the bonds. And this go back to the buying process which the depressed yields which made the borrowing process cheaper.
However the relevant threads the inflation which in the recent months have been at around 5% annualised. Which is kind of a lot when you compare it with the years before the pandemic. Of course the Feds promises us that the pace will go down and it will slow but now on days the things which the government or the Feds says happens.
The market also kind of expects to raise its benchmark bank lending rate at around twice next year when it comes back to the Feds. And the rate might perhaps by at around 0.5 percentage point.
2) The Covid Relief Programs Are Fading.
Even thou the Congress had enacted trillions of dollars in pandemic relief programs, those programs are slowly but surely on their way to expire.
The result of that will according to Brad McMillan (chief investment officer of Commonwealth Financial Network) be more or less “a radical downshift in income growth for pretty much the whole country” in 2022.
And this is because we as the consumers are amassed to savings during the pandemic. And we are the consumers are having the shown signs of being eager to spend, analysts see scant risk of a recession.