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Unsure of Where the Market is Headed in 2022? Check Out Our Just-Released Stock Market Report!<\/a><\/strong><\/p>\n\n\n\n 2022 is just around the corner and future predictions of the market are arising. As investors project different outcomes of next year\u2019s performance, it\u2019s important not to give into the negative narrative. Despite many uncertainties investors may have, 2022 could be a huge year for an upward turn in the economy. <\/p>\n\n\n\n Now is the time to focus on data that can help your\nlong-term investments. To help you do this, I am offering all readers our\njust-released Stock Market Outlook report. This report contains some of our key\nforecasts to consider such as:<\/p>\n\n\n\n If you have $500,000 or more to invest and want to learn more about these forecasts, click on the link below to get your free report today!\u00a0 __________________________________________________________________________<\/p>\n\n\n\n From an investment standpoint, a more hawkish Federal\nReserve is often believed to be problematic. A reduction in monetary stimulus,\ncoupled with rising interest rates, surely cannot be good for stocks, right?<\/p>\n\n\n\n A quick review of recent history can help us address this\nquestion. There is only one previous instance of Fed tapering, in 2013, and the\nstock market endured some short-term selling pressure in the midst of the QE\u2019s\nunwinding. But the selling pressure did not last very long. From the time Ben\nBernanke announced QE would be reduced (summer 2013) to the actual end of QE\n(fall 2014), the S&P 500 went up over +20%.3<\/sup> <\/p>\n\n\n\n The Fed then started raising interest rates in December\n2015, pushing the fed funds rate from 0.5% in December 2015 all the way up to\n2.5% by December 2018. As readers can see from the chart below, Fed tightening during\nthe last bull market caused a few blips and pullbacks, but QE tapers and rate\nhikes were not powerful enough to prevent the stock market from pushing higher.\n<\/p>\n\n\n\n The S&P 500 Over\nthe Last Decade<\/strong><\/p>\n\n\n\n I similarly do not expect a shift in the Federal Reserve\u2019s\ncurrent messaging and policy to have a meaningful effect on stocks. The stock\nmarket has long known about the Fed\u2019s plans to gradually remove monetary policy\nstimulus, and a slightly accelerated, well-telegraphed timeline for policy\nchanges should not serve as a negative surprise. <\/p>\n\n\n\n In fact, markets may even welcome an accelerated taper \u2013\nsince QE purchases put downward pressure on long-dated U.S. Treasury bond\nyields, QE is effectively flattening the yield curve and squeezing bank profits\nin the process. If an accelerated taper allows longer duration bond yields to\nmove higher while short-term interest rates remain close to zero, it could spur\nmore bank lending \u2013 a good outcome for the economy. <\/p>\n\n\n\n As for the Fed moving up their timeline for interest rate\nincreases, I think it is important for investors to remember that bull markets\ntend to end after the Fed\u2019s last rate hike \u2013 not their first one. As readers\ncan see in the S&P 500 chart above, the U.S. stock market can continue to\ndo well even as the Federal Reserve engages in fed funds rate increases. That\nprocess may begin in 2022, but it does not mean the bull market has to end as a\nresult.<\/p>\n\n\n\n Bottom Line for\nInvestors<\/strong><\/p>\n\n\n\n In my view, the Federal Reserve\u2019s shifting message and\npolicy is in response to a good problem. <\/em>In\nthe words of New York Fed President John Williams, the U.S. economy is \u201croaring\nback,\u201d and supply\/demand imbalances are putting pressure on prices. Demand is\nabove pre-pandemic levels, and supply can\u2019t keep up. I don\u2019t see this as a\npermanent problem. <\/p>\n\n\n\n Even\nstill, the Fed is probably right to take some action, even if only for optics.\nA slightly accelerated taper timeline and the possibility of rising rates next\nyear are not likely to move the needle on inflation at all, in my view, and I\nconcurrently don\u2019t see much effect of this tightening on the economy or stocks.\nI\u2019ve written before that corporate\nearnings and economic growth matter more than the Fed, <\/em>and I do not think a\nslight shift in the Fed\u2019s messaging and policy will affect either in the coming\nyear.<\/p>\n\n\n\n
IT\u2019S FREE.\u00a0Download the Just-Released December 2021 Stock Market Outlook<\/a>2<\/a><\/sup><\/strong><\/p>\n\n\n\n![\"\"](\"https:\/\/zacksim.com\/blog\/wp-content\/uploads\/2022\/02\/1_pic1-1-1024x395.png\")