2022 bear market: inflation and interest rates
2022 bear market: from January 3, 2022 to December 30, 2022.
Updated
What happened?
The highest inflation in 40 years forced the Fed to raise rates at a record pace. Stocks and bonds fell at the same time and the yield curve inverted sharply, but the recession did not arrive. For this analysis, the episode runs from January 3, 2022 to December 30, 2022.
What would Crisis Monitor have shown?
Recalculating the index each week with the data available at the time, it stood at 4 out of 100 when the decline began and peaked at 43 in Oct 2022. The index moved to Alert (35 or more) in Jan 2021 (12+ months before), but did not reach Crisis (60).
This is a reconstruction made after the fact using weekly data: it helps show how the indicators behave, but it does not guarantee that things will happen the same way again.
How did the data move in that crisis?
From one year before to the end of the crisis. The vertical line marks when it began; the dashed red line is the level beyond which the data point becomes a concern.
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Which data points warned first?
5 data points entered the stress zone before the crisis began: rise in unemployment (Sahm rule), unemployment benefit claims, factory output, consumer sentiment and others.
Gold and copper are not part of the index, but they help show fear and activity: see how they moved on the gold and copper pages.
The first time each data point entered the stress zone (score 66 out of 100), searching from 12 months before the start. “Before” = it warned before the crisis began; “after” = it reacted late. Note: after another crisis, some data points were still elevated from the previous one.
| Indicator | How does it usually behave? | When did it first become a concern? | When did it warn? | Moment of peak stress |
|---|---|---|---|---|
| Rise in unemployment (Sahm rule) | Moves with the crisis | Jan 2021 | 12+ months before | 3.63 Jan 2021 |
| Unemployment benefit claims | Usually warns early | Jan 2021 | 12+ months before | 304.2% Jan 2021 |
| Factory output | Moves with the crisis | Jan 2021 | 12+ months before | -5.7% Mar 2021 |
| Consumer sentiment | Usually warns early | Jan 2021 | 12+ months before | -35.5 pts Jul 2022 |
| Stock market fear (VIX) | Moves with the crisis | Jan 2021 | 11 months before | 32.95 Jun 2022 |
| Long vs short rates (2 years) | Usually warns early | Jul 2022 | 6 months after | -0.66% Nov 2022 |
| Dollar strength | Moves with the crisis | Jul 2022 | 6 months after | 114.10 Sep 2022 |
| Long vs short rates (3 months) | Usually warns early | Oct 2022 | 10 months after | -0.90% Dec 2022 |
| Store sales | Moves with the crisis | Dec 2022 | 11 months after | -1.5% Dec 2022 |
| Copper vs gold | Usually warns early | Never became a concern | — | -21.8% Oct 2022 |
| Ease of borrowing | Usually warns early | Never became a concern | — | -0.10 Oct 2022 |
| Financial stress (St. Louis) | Moves with the crisis | Never became a concern | — | 0.63 Jul 2022 |
| Credit of ordinary companies | Usually warns early | Never became a concern | — | 2.42% Jul 2022 |
| Recession probability | Moves with the crisis | Never became a concern | — | 2.2% Oct 2021 |
| Credit of risky companies | Usually warns early | FRED only publishes the last 3 years of this series (ICE license) | ||
Does the current moment resemble that crisis?
Score from 0 to 100 for each area, today and at different moments of that crisis.
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How does everything look now? See the live dashboard.