February 2022 Stock Market Overview

The US stock market finally succumbed to the pullback that experts predicted in the back half of 2021 in January 2022. The S&P 500 fell as much as 9.8 percent, and The Nasdaq Composite Index even approached the bear market territory. February is expected to be more volatile.

Wait and See is the Best Policy

In February, investors should stick to the wait and see policy. The political tensions between Ukraine and Russia are a matter of concern. So is the fact that the Federal Reserve will soon tighten the monetary policy and curb inflation. Many experts worry that it might damage the economy.

February is also about digesting the earning results from the last quarter of 2021 and assessing whether the pace of inflation will change or remain unchanged at current levels. A higher interest rate will likely bring more volatility and pressure on valuation levels. The market might also see a modest gain this month.

Things to Look Out For

If you are interested in the stock market, you should keep an eye out for the following:

Ø  Earnings from Ford Motor, Amazon, Qualcomm, Spotify, and Meta Platforms, among others.

Ø  The rate decisions from the Bank of England and European Central Bank are expected on Thursday.

Ø  US factory orders, initial jobless claims, durable goods, and Fed Board of Governor's confirmation hearing are also due on Thursday.

Ø  The US payrolls report for January will be out on Friday

Winter Olympics will also be kicked off this week, and Russia's President Vladimir Putin is likely to attend the opening ceremony on Friday

The Fed Might Increase the Interest Rates

As the businesses and households seem to be in good financial shape, The Fed might raise the benchmark interest rates. The goal will be to increase the cost of credit, and it will make the car, home, and student loans expensive as everyone will need to pay more on interest payments. Households are expected to be able to afford that as they gained cash savings during the pandemic.

How to Invest in February?

If you plan to invest, you should focus on building a portfolio that can go the distance instead of benefiting from the short-term gains. The first half of the year is expected to be volatile, so people should readjust the expectations for returns this year. Single-digit returns are more likely this year. Investors shouldn't expect returns like last year.

Experts also advise that investors must focus on building a portfolio that includes all 11 stock market sectors of the S&P 500 as focusing on just one sector could be risky. A balanced portfolio is highly recommended.

If you are just a beginner investor, you should focus on creating a diverse portfolio using low-cost index funds and ETFs that are already-diversified.

People who are new to the world of investing can learn the basics of investing by checking out this useful link.

You can also read about the top 10 stocks to buy in February 2022 here.





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