During the year 2022, the stock market was in bear-market territory. Indeed, the market was down more than 20%. It was considered one of the worst years in stock market history. It was a bloodbath; many investors lost a great portion of their wealth in stock's investments. For the short-sellers, 2022 was surely one of the most profitable years they’ve probably never experienced. According to Forbes, Ken Griffin, owner of Citadel, LLC returned $16 billion in pure profit, which made Citadel the most profitable hedge fund of the year while most hedge funds were sinking.
The war in Ukraine, rampant inflation, and high-interest rates were the major factors that precipitated the fall of the stock market last year. The Federal Reserve increased interest rates incrementally as a counter-response to inflation. As a result, this raise in interest rates increased the cost of borrowing for entrepreneurs and investors, and the higher stages of production dramatically slowed down. In fact, the tech industry is the one that took the hardest hit of this Great Inflation period in 2022. Tech companies such as Tesla, Amazon, Facebook, Zoom…etc. have seen their stocks tanking substantially, which led to massive layoffs. It was even predicted a recession would occur, yet nothing of that sort has truly taken place yet despite the market nose-diving. Overall, 2022 was the year of white-collar conundrums.
Many professional investors have predicted that if a recession were to happen, it would be a white-collar recession. So far, 2023 started rather decently. The S&P 500 is no longer in bear market territory but signs of a potential recession are still being exhibited. The tech industry continues on its layoff-spree, growth stocks have not truly recovered from their fall last year, and the Federal Reserve continues to maintain interest rates at high levels to tame inflation. Inflation has been decreasing but not substantially enough to claim that prices are stable.
Although the S&P 500 is no longer in bear-market territory, it is still difficult to claim that the bear market is over. Until inflation is brought down below 5% and interest rates have also been brought down, we cannot claim that the bear market is fully over. However, the stock market this year seems promising as a sound investment for retail and accredited investors. Let us hope that the market remains on this positive trajectory for the next 11 months.