Stock Market Ends in Worst Year Since 2008
The top indexes of the U.S. stock market all showed noticeable declines in 2022: The S&P 500 fell nearly 20% and the NASDAQ Composite Index declined 33%. Stocks in big tech companies like Amazon, Apple, Microsoft, and Tesla have all seen significant price drops as well.
With the Federal Reserve hiking interest rates to combat inflation, United States Treasury bonds have also taken a hit. 30-year U.S. Treasury bonds had their worst return in the last century. With the instability of the U.S. economy, households have taken a hit as well. 401(k) balances have decreased by over 20%. A large portion of Americans have express a negative sentiment about their financial status when compared to years prior.
According to U.S. News & World Report:
“The drop has changed the attitude of some savers. Fidelity reports 32% of individuals have negative feelings about their finances, compared to 30% who have positive feelings. This is a shift from a year ago, when 45% of workers viewed their finances with optimism, while 22% had a downturned view. For those who have lost a significant amount, it could be hard to view the current balances.“
U.S. News & World Report
Then, there’s the crypto market. With waning confidence in cryptocurrency due to financial fraud (like the FTX scandal), raising interest rates, and fear of government regulation, the value of the most popular cryptocurrencies has drastically declined. The price of Bitcoin has dropped 64% and Ethereum has dropped 67%.
The poor performance of the economy is due to a number of factors, but the bulk of the blame is from supply chain bottlenecks (caused by both the COVID-19 pandemic and geopolitical issues such as the war in Ukraine) and inflation. These factors have created a more violate market that has left investors unsure of how to spend their money.
When the market is unstable, individuals tend to save their money. But during a time of high inflation, individuals are less likely to save money because their money is depreciating at a higher rate. This is leading to a highly volatile market where individuals are unsure of what to do with their money. There has also been a net wage loss for individuals under President Biden, as the current rise in price levels is outpacing nominal wage increases.
Despite these issues, the White House continues to deny the financial hardship facing millions of Americans. President Biden has falsely claimed that the government has “hit record after record” on his watch and that he has “raised wages.” But the economic problems our country is facing will only be exacerbated if Congress continues to vote into law massive spending bills that increase the debt and our current inflation crisis.
