Why the Stock Market is going Down | Stock 2022 Update

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Why the Stock Market is going Down | Stock 2022 Update

 

This is a scary moment for stock market investors.

The S&P 500, a common benchmark used to measure how the stock market is doing overall, fell into correction territory Monday following its worst week since March 2020. (A market correction is a decline of between 10% and 20% from its most recent high.) The news comes after a rough start to the year for investors overall, with tech stocks and cryptocurrency suffering particularly bad price dips.

Swings in the stock market are hard to stomach, especially for investors who have gotten used to strong returns.

Here’s what experts say is going on with stocks right now — and what you should do about it.

Why is the stock market down?

There are several factors impacting the stock market right now, including the Omicron variant of COVID-19 slowing economic growth and recent disappointing earnings results.

But the most important factor impacting stocks is the notion that the Federal Reserve is going to raise interest rates and remove liquidity from the market, says Jack Ablin, chief investment officer and founding partner at Cresset Capital. (Liquidity refers to how easily assets can be bought and sold.)

The market was also long overdue for a correction, says Jim Paulsen, chief investment strategist at The Leuthold Group. And now that prices have started to fall, investors are fearful.

“The reason it’s trading like it’s trading at the moment is just purely emotions,” Paulsen adds. “You’re not going to be too worried about fundamental reports — like economic reports or earnings reports even — until this market just technically finds some stability for a few days.”

Investors are trying to “get out of the way” right now as markets fall, Paulsen says, driving the sell-off to continue. We’ve seen this before: In March of 2020, investors yanked $326 billion out of mutual funds and exchange-traded funds, which was more than triple the fund outflows seen in October 2008, the previous record, according to Morningstar.

“How low can this go? No one knows and until it shows some bounce and some stability for a period, I think emotions are going to be the primary thing that’s pushing the market,” Paulsen says.

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