Welcome to Fintastic Females, our journey to discovering the mythical island of freedom together. I’m Kalyani, your finance expert host, and joining me is Rupali. In today’s episode of Fintastic Females, we delve into the intricacies of the year 2022. It has been a year filled with complexity and significant events, and we are here to provide a detailed analysis. Throughout the year, we witnessed extreme highs and lows in various aspects of the economy. The media constantly bombarded us with headlines declaring historic milestones, but eventually, we became desensitized to the constant barrage of news. To give you some context, the US economy’s performance is often gauged by indices like the S&P 500, which experienced a 19% decline, while the Dow Jones Industrial Average, which comprises industrial stocks, fell by 9%. Meanwhile, the tech industry, represented by the Nasdaq, plummeted by 31%. These numbers reveal the market gap and the significant decline in technology and growth companies, while the oil industry experienced a minor decrease of only 1.2%. An intriguing observation we made was the simultaneous decline of both stocks and bonds. Typically, there is an inverse correlation between the two, but this year, they moved in the same direction, with bonds also experiencing a 10% decline. This peculiar situation prompted us to explore the reasons behind it. Rupali and I engaged in discussions and analyzed the current landscape. We discovered that the positive correlation between stocks and bonds was driven by the sell-off in both markets. Bonds, although not as heavily impacted as equities, still suffered losses. This divergence from the typical inverse relationship was influenced by speculations surrounding the Federal Reserve’s actions to control inflation and unemployment, which are within their purview. The uncertainty surrounding the Fed’s decisions on interest rates heightened market concerns and led to further sell-offs driven by perceived risks rather than actual market conditions. As we delved deeper into the interest rate situation, we found that at the beginning of 2022, the Federal Reserve had already indicated the possibility of up to nine rate hikes. Throughout the year, they implemented seven rounds of rate hikes, increasing interest rates from 0.25% to 4.5% by mid-December. Each time the Fed made an announcement or held a press conference, the market reacted with fear and witnessed significant sell-offs. Furthermore, the inflation reports played a role in exacerbating market volatility. In June, inflation numbers peaked at 9.1%, gradually declining afterward. This unusual correlation between high inflation and sharp interest rate increases puzzled us. The COVID pandemic and the Fed’s intervention to support the economy played a significant role in this situation. The Fed’s initial efforts to make money more accessible and cheap were commendable, but they were not swift enough in restoring balance. Thus, the subsequent aggressive interest rate hikes were attempts to rectify the situation and control inflation. However, this move resulted in a market filled with anxiety and fear. Interest rates rose significantly, impacting loans and overall spending power. For instance, a one million dirham loan experienced an interest payment increase of approximately 750 dirhams per month or 9,000 dirhams per year. Such changes in interest rates affect lifestyles, financial planning, and budgeting. The Fed’s intention behind these measures was to avoid stagflation, a scenario with high inflation and unemployment rates, which is challenging to reverse. While their actions aimed to control inflation, they unintentionally created fear and anxiety in the market. The emotional aspect of the market cannot be ignored, as it often guides investor sentiment. The lessons learned from the events of 2022 would serve as a foundation for navigating the evolving financial landscape in the years to come. As we bid farewell to 2022, we look forward to a future filled with new opportunities, growth, and the collective wisdom gained from the challenges faced. Remember, in the realm of finance, uncertainty may be constant, but our ability to adapt and persevere is what truly defines us. Stay tuned for our upcoming episodes of Fintastic Females as we continue our journey into the fascinating world of finance and empower ourselves with knowledge.