Smooth sailing for U.S. stocks to close out a record setting 2021.
The major averages all posted double-digit returns the past year. The S&P 500, in particular, had nearly a 27% gain. It's thanks in part to lifting COVID lockdowns and the Federal Reserve maintaining supportive measures. However, Richard Rosso, a certified financial planner, says 2022 may be rockier for the stock market.
“If the Fed has to pull back, and rates go higher then that is going to be highly disruptive for stocks in the face of extremely heavy valuations on the stock market currently,” Rosso said.
Investors and analysts believe the Fed likely will taper off it's easy monetary policy due to persistent inflation. Another looming problem Americans hope will not spin out of control.
“The Fed is going to have to pull away from their emergency procedures. If the economy is as strong as it looks, then we don’t need emergency procedures,” Rosso explained. “Not only that, there are going to be rate hikes coming, and the market is not going to like the reduced liquidity.”