07-01-2022, 09:55 AM
- A multitude of factors conspired to generate the stock market’s worst first-half since 1970, all centering on inflation.
- Besides the damage to the big stock market averages, there has been carnage everywhere.
- Some hope lies ahead: When the S&P 500 plunged 21% in the first half of 1970, it promptly reversed those losses to gain 26.5% in the second half.
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A multitude of factors conspired to generate the stock market’s worst first-half since 1970, but they all emanated from one word: inflation.
The cost of living started the year running at levels the U.S. had not seen since the early 1980s.
Worse, Federal Reserve officials, armed with full-year forecasts of “transitory” inflation that now seem almost comically inaccurate, fell behind the curve, endangering a market and economy still fragile from the Covid pandemic.
Six months later, the damage has been severe if something short of catastrophic: An S&P 500 down nearly 20%, a symbol of how risk investing across the spectrum, from crypto to IPOs and even some areas of the commodities market, has collapsed.
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