What Has Caused the 2022 Stock Market Volatility

2022 has been a year of high stock market volatility. By the end of June, YTD figures showed a nearly 20% drop in the S&P 500 and a 30% drop in the Nasdaq 100. This is in addition to many growth stocks dropping 50 to 80% YTD. Financial experts agree on several factors that have caused this volatility. 

 

 

 

The Federal Reserve’s Actions

 

 

Some of the volatility comes directly from the actions of the Federal Reserve. During the pandemic, it used quantitative easing (QE). This was crucial during the stock market crash early in the pandemic in 2020. It involved buying long-term securities to improve the economy. It also reduces interest rates and increases the supply of money. 

 

 

Recently, however, the Federal Reserve switched to quantitative tightening (QT). This involves selling long-term securities as well as increasing interest rates. The combination has led to sell-offs in the stock market and volatility. 

 

 

 

Rising Inflation

 

 

Another significant factor behind the stock market’s volatility is inflation. It is no secret that inflation is high. It is currently around 8%, compared to the average of around 3%. While the rate is reported at around 8%, experts predict it is higher. Inflation means people spend less and save more, causing volatility in the market. 

 

 

 

Reevaluations Following the Pandemic

 

 

Yet another influence is companies reevaluating following the pandemic. Some sectors are experiencing heavy sell-offs. Simply put, investors have lost faith in some previously well-performing stocks. 

 

 

 

The Conflict in Ukraine

 

 

The conflict between Ukraine and Russia is another cause of the volatility. It has led to dramatic changes in the price of the ruble and oil. Oil in rubles is at its all-time high. 

 

 

 

Conclusion

 

 

Many causes are behind the current stock market volatility. From inflation to the Federal Reserve’s actions to the war in Ukraine, many factors are at play. Experts are working hard to determine what will happen next, but it is impossible to predict the future.