A week that centered on the Federal Reserve's direction and the future of interest rates finished in a fitting way, with stocks retreating Friday in response to hawkish commentary from one of the Fed's members.
While the Fed's latest policy announcement signaled the likelihood of interest-rate hikes starting in 2023, St. Louis Federal Reserve President Jim Bullard took a more aggressive tone on CNBC's Squawk Box.
Bullard not only said he could see the Fed hiking its benchmark rate late next year, but also questioned the central bank's purchases of mortgage-backed securities amid a housing market that has remained persistently sizzling. Stocks dropped at the onset and never got back up off the mat.
From just $107.88 $24.99 for Kiplinger Personal Finance
Become a smarter, better informed investor. Subscribe from just $107.88 $24.99, plus get up to 4 Special Issues
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Stocks dropped at the onset and never got back up off the mat. The Dow Jones Industrial Average declined 1.6% to 33,290, closing out an 3.4% weekly decline – the industrial average's worst weekly performance since dropping 6.5% in late October. The S&P 500 (-1.3% to 4,166), Nasdaq Composite (-0.9% to 14,030) and small-cap Russell 2000 (-2.2% to 2,237) all finished in the red as well.
Other action in the stock market today:
- U.S. crude oil futures rebounded by 0.8% to $71.64 per barrel, good enough for their fourth consecutive week of gains.
- Gold futures suffered their biggest weekly decline in more than a year, dipping 0.3% on Friday to $1,769.00 per ounce.
- The CBOE Volatility Index (VIX) rocketed 16.6% higher to 20.70, its higheset level since mid-May.
- Bitcoin prices suffered a steep 6.2% drop to $35,437.09. (Bitcoin trades 24 hours a day; prices reported here are as of 4 p.m. each trading day.)
Don't Let Inflation Scare You Away
It's normal to fear what rising prices could do to stock values, but your portfolio might actually be your best financial defense against inflation.
"The value of a dollar may fall over time, but the stock market has historically done the opposite," says Callie Cox, senior investment strategist at Ally Invest. "The S&P 500 has grown an average of 8% a year since 1990. Compare that to the core Consumer Price Index's 2% average annual growth over the same time period. Stock market growth has historically overwhelmed inflation, and that's why investing is so critical for building wealth."
But naturally, there are some ways to stay invested in an inflationary environment that will be more effective than others.
Real estate investment trusts (REITs), for instance, historically have been admirable performers during periods of higher inflation, as real estate (and the rents REITs can charge) tend to go up along with consumer prices. Value stocks have also proven resilient in the past.
Several strategies are quite effective against inflation, in fact – and most of them are represented by mutual funds. We've recently taken a look at a number of no-load mutual funds that provide diversified exposure to a number of inflation-proof (or at least inflation-resistant) assets. Check them out.
-
Dow Adds 646 Points, Hits New Highs: Stock Market TodayIt was "boom" for the Dow but "bust" for the Nasdaq following a December Fed meeting that was less hawkish than expected.
-
5 Types of Gifts the IRS Won’t Tax: Even If They’re BigGift Tax Several categories of gifts don’t count toward annual gift tax limits. Here's what you need to know.
-
The 'Scrooge' Strategy: How to Turn Your Old Junk Into a Tax DeductionTax Deductions We break down the IRS rules for non-cash charitable contributions. Plus, here's a handy checklist before you donate to charity this year.
-
If You'd Put $1,000 Into Coca-Cola Stock 20 Years Ago, Here's What You'd Have TodayEven with its reliable dividend growth and generous stock buybacks, Coca-Cola has underperformed the broad market in the long term.
-
If You Put $1,000 into Qualcomm Stock 20 Years Ago, Here's What You Would Have TodayQualcomm stock has been a big disappointment for truly long-term investors.
-
If You'd Put $1,000 Into Home Depot Stock 20 Years Ago, Here's What You'd Have TodayHome Depot stock has been a buy-and-hold banger for truly long-term investors.
-
If You'd Put $1,000 Into Bank of America Stock 20 Years Ago, Here's What You'd Have TodayBank of America stock has been a massive buy-and-hold bust.
-
If You'd Put $1,000 Into Oracle Stock 20 Years Ago, Here's What You'd Have TodayORCL Oracle stock has been an outstanding buy-and-hold bet for decades.
-
If You'd Put $1,000 Into Sherwin-Williams Stock 20 Years Ago, Here's What You'd Have TodaySherwin-Williams stock has clobbered the broader market by a wide margin for a long time.
-
If You'd Put $1,000 Into UnitedHealth Group Stock 20 Years Ago, Here's What You'd Have TodayUNH stock was a massive market beater for ages — until it wasn't.
-
If You'd Put $1,000 Into Berkshire Hathaway Stock 20 Years Ago, Here's What You'd Have TodayBerkshire Hathaway is a long-time market beater, but the easy money in BRK.B has already been made.
