A1 Trading Company

Ticker tape by TradingView

January 7, 2022

Will The Stock Market Crash In 2022?

Frank Cabibi

Should we be preparing for a stock market crash in 2022? For nearly two years, stock market gains have been unprecedented due to the Fed-induced rally. Now that the US is near full recovery in the jobs market, investors are looking towards a more hawkish stance in monetary policy. Tapering has already begun, and soon enough, interest rates will rise. Investors expect three hikes this year just as the Fed signaled, but nothing is certain yet. Should the Fed stop purchasing assets and start raising interest, everyone is debating whether or not to be ready for another stock market crash or correction while the Fed steps out of the market.

Scenarios For A Stock Market Crash in 2022

Just as we discussed earlier, a rate hike will probably be bearish on stocks as investors might find more value in higher treasury yields. Without any fuel from the Fed, the natural market might stumble without its monetary backbone that held it in place for so long.

Additionally, if jobs data keeps missing expectations like we saw in November and December, we could be looking at a slowing economy. This will only add to the pressure on stocks as demand for risk-on trades will fade.

https://www.forexfactory.com/calendar#graph=122937

Omicron and future variants could topple the economy if the strains get more contagious and more severe. The fear of another government shutdown is still in the backs of our minds too. Up until March, the markets may just be choppy. This means technical analysis is much less effective with neither a bullish or bearish direction.

Scenarios Against A Stock Market Crash in 2022

One major driver of the stock market is earnings. If companies that are making money can continue to make money, we might be looking at higher stock prices. This year was projected to be a heavy growth year as well, so small caps could be on the rise should they demonstrate large growth. 

Despite the Fed’s statements, there is a possibility that they decide to hold off on three hikes in 2022. Because jobs are slowing, the Fed might take a step back and reconsider three interest raises. If interest rates are rising but at a slow pace, yields may still be stock-friendly as the amount of interest does not outweigh market gains. 

Overall, no one really knows what is in store for us this year, but a crash seems unlikely after considering all these factors. That is because each variant seems to be weaker than the last, earnings growth is still strong, and the rate hikes discussed still seem that they wouldn’t hurt the market too badly. However, we still might see further correction in the meantime, and this year may even be flat for the most part. But a 20-30% crash like in 2020 seems unlikely.

SPX500 Setups

Here on the daily timeframe, we see two hard rejections from the lows while price sits near support around $4718. If today’s candle can close with a bullish hammer formation, we could see a day in the green tomorrow. If not, it looks like price can find some heavy support on the two rising trend lines below.

A1 Edgefinder

#1 Market Scanner Tool
Take 10% off using code "READER"
GET ACCESS NOW
Want to See Our Trades?

Join The VIP Community!

Our entries, exits & analysis
Live Webinar Coaching
Trading Chatrooms
Strategy Library 
Exclusive Trading Guides
Use Code "READER" for 10% OFF!
JOIN NOWJoin FREE Discord
Listen to More Episodes
Why the New FOMC Decision Matters

Yesterday, the Federal Open Market Committee (FOMC), the Federal Reserve’s policy-making body, implemented yet another 75 basis point interest rate hike. While this move was perfectly in line with market forecasts, Chair Powell’s comments following the subsequent press conference, in which he discussed the FOMC’s new set of economic projections, were significant. He continued to […]

Read More
Shocking CAD Inflation News

Statistics Canada released a surprising new batch of inflation data this morning: month-over-month CPI failed to meet market forecasts, declining by 0.3% instead of the anticipated 0.1%. Rather than being an outlier, the other measurements of CPI mostly followed suit, as both year-over-year Trimmed CPI and Median CPI likewise failed to meet expectations. Trimmed CPI’s […]

Read More
2 Paths for Aussie Bears

At 9:30 pm Eastern Time tonight, the Reserve Bank of Australia (RBA) will be publishing their latest round of monetary policy meeting minutes. While there is a chance that their intentions could come across as more hawkish than expected, they currently have little reason to be. Despite relatively low unemployment at 3.5%, steady GDP growth, […]

Read More
DISCLAIMER: All comments made by TraderNick’s Forex Group, LLC are for educational and informational purposes only. All comments should not be construed as investment advice regarding the purchase or sale of any securities or financial instrument of any kind. Please consult with your financial adviser before making an investment decision regarding any securities or financial instruments mentioned by TraderNick’s Forex Group, LLC. TraderNick’s Forex Group, LLC assumes no responsibility for your trading and investment results. All information on any of the platforms utilized by TraderNick’s Forex Group, LLC was obtained from sources believed to be reliable, but we do not warrant its completeness or accuracy, or warrant any results from the use of the information. TraderNick’s Forex Group, LLC, its employees, representatives, and affiliated individuals may have a position or effect transactions in the securities and financial instruments herein and or otherwise employ trading strategies that may be consistent or inconsistent with the provided strategies. Trading of any type involves very high risk and may not be suitable for all investors. TraderNick’s Forex Group, LLC, its subsidiaries and all affiliated individuals assume no responsibility for your trading and investment result. Read our full disclaimer here
Home
Edgefinder
VIP
Menu
homesmartphonelaptopmenu linkedin facebook pinterest youtube rss twitter instagram facebook-blank rss-blank linkedin-blank pinterest youtube twitter instagram