It has been painful to watch the stock market in 2022. So, how much has the stock market dropped in 2022? The S&P 500 is down over 17% year-to-date and has experienced declines well over 20% YTD at some points throughout the year.
- The 2022 bear market was primarily due to inflation and rising interest rates.
- There is little hope of a market recovery by the end of the year. Investors should expect the bear market to persist until 2023.
- The Federal Reserve’s interest rate hikes should help to stabilize the economy at some point in 2023, which would lead to a potential market recovery.
What’s Going On With the Stock Market?
The U.S. stock market recently experienced the longest bull market in history. But the market is cyclical. That means it goes up and down in cycles, and at some point, the bears had to step in.
In the case of the 2022 bear market, the primary cause is inflation. As prices grew at dramatic rates, the Federal Reserve had to do something. It responded by increasing interest rates.
As rates went up, borrowing money also increased in price, leading to less demand for goods and services. The Fed hopes that its actions in increasing interest rates will ultimately lead to slowing inflation and better economic conditions.
Unfortunately, higher rates and less spending in the United States typically equate to reduced corporate profits and market declines.
Will the Stock Market Recover in 2022?
As 2022 nears a close and inflation levels are still high, there’s little chance of a market recovery by the end of the year. Moreover, experts suggest that the Federal Reserve will continue increasing interest rates, at least through December. With further rate hikes ahead and little time left in the year, the bear market is likely to persist until at least 2023.
How Long Will It Take for the Stock Market To Recover in 2023?
Although there’s no way to answer this question with any level of certainty, there’s a strong chance that the bear market will come to an end and the market will begin to recover in 2023. It typically takes between 12 and 18 months for Fed rate hikes to lead to economic stability.
The Federal Reserve began increasing interest rates in March of 2022. So, at best, the move should lead to stability by March of 2023 and at worst by September of 2023. As this stability sets in, the stock market recovery should start.
How Long Did It Take for the Stock Market to Recover in the Past?
On average, bear markets last 289 days. However, some bear markets throughout history have been far shorter and some have been far longer.
Can I Recover My Losses in the Stock Market?
There’s no way to get the money you lost in the stock market back immediately. However, valuations are typically low during bear markets. So, it’s a good idea to add more stock to your portfolio to begin recovering your losses as the market turns positive.
Bear markets can be scary, but they don’t last forever. Instead of making a rash decision to pull your money out of the market, consider buying more shares while valuations are low to benefit as the bull market takes hold.
Information is accurate as of Dec. 12, 2022.