The chart in this newsletter and the two charts in my newsletter titled Will the Stock Market Revert to the Mean in 2022?
are really good charts to use with clients. To read my “revert to the mean” newsletter, click on the following link:
Inflation Peaks—What that Means for the Market Will Surprise You!
By: Roccy DeFrancesco, JD, CAPP, CMP
I’d say the one thing all Americans can agree on is that inflation seems out of control.
In less than a year, we’ve seen inflation go from under 2% to a high in December of 7.1%.
Is 7.1% the “peak” inflation rate? It’s hard to imagine it will go higher, but you never know.
What happens to the stock market when inflation is high?
The conventional wisdom seems to be that the stock market doesn’t like inflation and many assume that the stock market will go negative.
Certainly, in the short-term, the stock market generally has negative days (some quite large).
But the real question is:
In the year following a “peak” in the inflation rate, what’s been the return in the stock market?
Here’s a chart that lists 13 historical peaks in interest rates going back to 1950 and the 12-month stock market returns for the following year.
Out of the thirteen peaks going back to 1951, only three had negative returns in the year following a peak inflation rate.
What’s the point of this newsletter?
The idea with data like what is provided in this newsletter and my reversion to the mean newsletter is to help advisors give good information to clients so they don’t PANIC!
If clients panic, that means they have lost trust in their advisor (meaning you could lose clients).
Being proactive and providing clients with simple but powerful historical data they can easily understand can help prevent panic which is good for clients and their advisors.
2022 Stock Market Outlook (webinar on demand)
While there is no guarantee that the stock market will be positive in 2022, the indicators financial firms use show that there is a good chance it could be.
Joe Mass, in his 2022 Stock Market Outlook/Prediction Webinar, forecasted a 7.5%-9.5% positive return in 2022. If you didn’t watch Joe’s webinar, you can do so by clicking on the following link or image:
To listen to Joe “Live on Demand” where he details (including explaining the five primary indicators he uses) how he determines his range of returns for 2022, click on the following link: