The stock rally is back on track. Memories of 2022 linger.
Subscribe to enjoy similar stories. Investors have to gauge whether corporate earnings can perpetuate the stock rally. Stocks got their groove back in the days ahead of Donald Trump’s presidential inauguration, but some investors are worried that the shadow of 2022 will loom over markets this year.
The S&P 500 index and Dow Jones Industrial Average logged their best week since early November after Wednesday’s consumer inflation report suggested underlying price pressures were easing. Investors, who were largely positioned for a disappointing report, rekindled the faltering stock rally. The yield on the benchmark 10-year Treasury note pulled back and ended the week at 4.61%.
The rally put stocks back in the green for 2025, but some analysts and investors worry the reprieve will be brief. With Trump returning to the Oval Office on Monday, they worry that the hefty tariffs and mass deportations he has proposed will reaccelerate inflation. “The threat of higher inflation just lives so large in our head that it’s easy to go to a spot where we imagine 2022 happening all over again," said Callie Cox, chief market strategist at Ritholtz Wealth Management.
“That wound of inflation is still fresh." Stocks and bonds fell in tandem in 2022 after the Federal Reserve began aggressively raising interest rates to tame wayward inflation. The bruising losses left traders with nowhere to hide, until the frenzy over artificial intelligence pushed stocks into a bull market the following year. Investors are on edge that Trump’s proposed agenda and other government policies could set off another leg higher for bond yields and, in turn, send stocks reeling again.
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