Stocks and Bonds Down Sharply to Start 2022

The stock markets got whacked last week, with the Dow (-0.2%), NASDAQ (-4.5%), and S&P 500 (-1.8%) exhibiting the worst opening week since 2016.  Bonds were also down sharply, as taxable bonds were down about 1.5% and tax-free municipal bonds were down around 0.5% - 0.8%.  Those are large weekly losses for bonds as well.

Both the stock and bond markets reacted adversely to the same economic headlines, and that is concerns that the Fed will be raising interest rates in 2022 at a quicker pace than previously expected, in an attempt to combat inflation.  Higher PE stocks, such as growth and technology companies, are more susceptible to interest rate movements, which explains the sharper drop in the NASDAQ than the Dow.  Please note that I completed writing a 2022 economic outlook that is currently being reviewed, but should be published in the coming days.

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