Market Review 2022: After a Down Year, Looking to the Past as a Guide

KEY TAKEAWAYS

• Stocks had their worst year since 2008, and bond prices also fell as inflation reached a four-decade high.
• Value stocks served as bright spot, outperforming growth by the largest margin since 2000.
• Markets may have been down, but history suggests that’s no time to panic.

It was an up-and-down year for markets—in the end, one with more down than up. The world gave financial markets a lot to process. The coronavirus pandemic eased but remained a global concern, as did the supply-chain issues that accompanied its arrival. Inflation reached a 40-year high in the US,1 and the Federal Reserve pursued a series of interest rate increases to combat rising prices, actions similar to those taken by other nations’ central banks. Russia’s invasion of Ukraine in February brought uncertainty about political stability and energy prices, among other worries. A midterm US election shifted more power to Republicans but left Democrats in a stronger position than some had expected. Against this backdrop, equity and bond markets fell for the year, despite several rallies.

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