 | This title's factual accuracy is disputed. (July 2024) |
The 2022 stock market decline was a bear market that included the decline of several stock market indices worldwide between January and October 2022. The decline was due to the highest inflation readings as part of the 2021-2023 inflation surge and the resulting increases in interest rates, combined with fears of a global recession due to a decline in economic indicators and an inverted yield curve, exacerbated by supply chain disruptions due to the 2022 Russian invasion of Ukraine and uncertainty over the long-term effects of the COVID-19 pandemic on the economy.[1][2]
In 2021, many central banks undertook a zero interest rate policy, assuming the rise in inflation to be "temporary" or "transitory". In 2022, when inflation readings were much higher and stickier than originally expected, central banks rapidly tightened policy and reduced market liquidity. The Federal Reserve raised interest rates 11 times starting in March 2022, resulting in the highest nominal interest rates since the 2000s.[3] It also reintroduced a policy of quantitative tightening in June 2022.[4] The European Central Bank raised rates 10 consecutive times during the same period.[5]
In the first two quarters of 2022, U.S. gross domestic product (GDP) posted its first two declines since the COVID-19 recession; decreasing at an annual rate of 1.6% in the first quarter of 2022 and a 0.9% annual rate in the second quarter.[6] GDP growth rates in the European Union also slowed significantly in the first half of 2022.[7]
However, the rate of inflation peaked in late 2022 and declined thereafter, while economic growth accelerated in the second half of 2022, ending fears of a recession and leading to a rebound in stock prices starting in late 2022. The end of the stock market decline was also a result of the start of the AI boom, predictions of lower or stable interest rates, and predictions of a soft landing.[8] By 2023 and 2024, many stock market indices reached all-time highs.[9]
- ^ Vega, Nicolas (June 14, 2022). "Stocks have officially entered bear market territory—here's what that means and what you should do". CNBC.
- ^ Toews, Phillip (March 14, 2022). "Opinion: Ukraine War Likely Has Triggered Lasting Bear Market". Barron's.
- ^ Rodini, Laura (April 12, 2024). "A timeline of the Fed's '22–'23 rate hikes & what caused them". TheStreet.com.
- ^ Cordes, Lucy; Ferris, Erin (June 14, 2024). "Who Buys Treasuries When the Fed Reduces its Holdings". Federal Reserve.
- ^ Reid, Jenni (October 26, 2023). "European Central Bank holds interest rates steady after 10 consecutive hikes". CNBC.
- ^ Atkinson, Tyler; Wei, Victor; Zhou, Xiaoqing (August 2, 2022). "U.S. likely didn't slip into recession in early 2022 despite negative GDP growth". Federal Reserve Bank of Dallas.
- ^ "GDP up by 0.7% in the euro area and by 0.6% in the EU". Eurostat. July 29, 2022.
- ^ Ermey, Ryan (December 20, 2022). "Investing experts predict a 'soft-ish landing' for the economy in 2023—here's what that means for your money". CNBC.
- ^ John, Alun (February 22, 2024). "European shares hit all-time highs, global momentum builds". Reuters.