COVID-19 Impacts on the 2022 Market
COVID-19 Impacts on the 2022 Market
Written by the Millennial Trader
As the year comes to a close, people are beginning to look at how the market did this year. Although over two years have passed since COVID-19 and mandated quarantine shut down our economy, we are still recovering from the repercussions. The pandemic significantly damaged previously thriving economies by shutting down businesses from mom-and-pop shops to large chain franchises. The financial market depends on what is going on in the world, and even though the effects of COVID have recently been dormant, there is no telling how it will continue to affect the market.
This article will review the research and results found regarding the market impacts of COVID-19 in 2022. Reflecting every year to examine the good and the bad of the past year is a habit that both new and existing traders will benefit from before entering the next year.
No matter what market one trades: stocks, commodities, bonds, or real estate, investments continue to be affected by the pandemic. Although everyone’s priorities focused on their health and not the market during most of 2020, money problems were as prevalent as ever.
When the quarantine mandate was issued, the economy shut down, leaving most of the population without any source of income for weeks. And it continued to leave millions without jobs once it opened up again. We assumed that when we all hit pause for two weeks, everything else would too, and we would go back to normal; but that did not happen.
At the time, it looked like armageddon as the market seemingly suffered a painful death. The pandemic provoked a colossal amount of selloffs, and the major stock indexes plummeted. Some of these more significant stocks had not taken such a massive hit since the “Black Monday” event almost 40 years ago. As COVID-19 began to spread, stocks saw massive declines as investors started backing out, and it seemed the whole market was beginning to collapse.
This year, the bear market has become deeper and deeper, and many significant stocks saw a massive decrease in value. For instance, the Nasdaq 100 has dropped 33%, while the popularized cryptocurrency Bitcoin has taken a brutal hit, losing nearly 60% of its value (Suleymonova, 2022).
Although one would assume the worst was over by 2021, the nightmare continued. While inflation levels are constantly in flux, 2022 saw its inflation rate reach 8.5%, the highest it had been since 1982 (Balance, 2022). As our lives began to return to a sense of normalcy, May 2022 saw the stock markets plummet to their lowest level in more than 18 months, influenced by the rise in inflation and the effects of China’s newly issued COVID-19 lockdown.
My research shows the first half of 2022 demonstrated the most signs of struggle. In the first few months, the market economy was attempting to make strides and begin a slow recovery process from the events in 2020-21, yet every step forward appeared to lead to two steps back. The culmination of the COVID-19, political party changes, war, and inflation not only had traders worried for their investments, but it had everyone fearing another recession may have been looming.
However, the media tends to focus on the negative, and 2022 was not all doom and gloom. In the second half of 2022, the market has still been far from perfect, but it began to pick back up and demonstrate some hopeful changes for the following year. Despite the challenges, many traders or investors might even argue that they had a good year despite the challenges.
The market has been bearish for quite some time, but we never know what tomorrow holds. For reference, in October of this year, the market index for U.S. Equities was up 8%, and November looks like it will continue to follow upward. If we look at it from a historical perspective, the index posts usually gain around 60% of the time, with an average gain of 4% for the up months, like October (Silverblatt, 2022).
COVID-19 is yet to be a thing of the past and will most likely continue to affect the markets going forward. Nevertheless, the more time passes, the more we can begin to see the light at the end of the tunnel. The economy and markets have proven resilient over the last 150 + years, and it is no less resilient today.
Ultimately, we will never forget the pandemic and the repercussions that followed; but that does not mean we have to continue to live in the past forever. Given the most recent index numbers, the predictions for 2023 are looking more hopeful than we have seen in a while. As most of us know, there is never any certainty in the market’s future, but we can only hope 2023 will offer a smoother journey for us traders and investors and an overall better economy.
Amadeo, K. (Oct 2022.). US inflation rate by year from 1929 to 2023. The Balance. Retrieved November 16, 2022, from https://www.thebalancemoney.com/u-s-inflation-rate-history-by-year-and-forecast-3306093#:~:text=Year%2Dover%2Dyear%20inflation%20rates,its%20highest%20rate%20since%201982.
Suleymanova, R. (2022, September 30). US bear market deepens: What that means for you. Financial Markets News | Al Jazeera. Retrieved November 16, 2022, from https://www.aljazeera.com/economy/2022/9/30/bear-market-what-it-means-and-how-long-the-us-may-be-in-one
Understanding covid-19’s impact on your investment portfolio. (Sep 2022) RegionsBank. Retrieved November 16, 2022, from https://www.regions.com/insights/wealth/investments-and-markets/developing-and-adjusting-your-strategy/covid-19-and-your-investment-portfolio#:~:text=As%20COVID%2D19%20spread%20across,peak%20in%20just%2016%20days.
Ganie, I., Yiday, M., & Wani , T. (Feb 2022). Impact of Covid-19 outbreak on the stock market: An – sage journals. Sage Journal Publications. Retrieved November 17, 2022, from https://journals.sagepub.com/doi/full/10.1177/22785337211073635Silverblatt, H. (Oct 2022) S&P dow jones indices. U.S. Equities Market Attributes October 2022 – Commentary | S&P Dow Jones Indices. (n.d.). Retrieved November 16, 2022, from https://www.spglobal.com/spdji/en/commentary/article/us-equities-market-attributes/#:~:text=For%20October%202022%2C%20the%20index,overall%20average%20increase%20of%200.83%25.