The stock market has been flipped upside down in 2022. Here's why, and what it means for you.

The stock market is going to go up in 2022, as a result of a policy shift from the Fed.

The images are from the same company.

The new year is off to a rocky start for investors, with a rotation out of high-risk growth and into safer value stocks.

The S&P 500 is down 4% so far this year, reversing part of its 27% gain in 2021. The sell-off has been even worse for the Nasdaq 100, which is down 7% year-to-date, and a quarter of last year's gain.

Ark Invest's worst year since its inception in the year after speculative stocks peaked was in 2021.

The weakness in smaller speculative growth companies was masked by the huge gains of mega-cap tech stocks like Apple, Microsoft, and, Alphabet.

The same companies are down 8%, 7%, and 4% so far this year.

The Fed Chairman has shifted the central bank's monetary policy in response to economic conditions. The Fed wants to reach maximum employment and keep prices stable.

The Fed lowered interest rates in order to encourage consumer demand and buy bonds to make the credit market more accessible to companies that needed to raise debt.

US inflation rose to levels not seen since 1982 as a result of those policies. According to estimates from JP Morgan, the US economy is poised to hit a new record.
This is bad news for growth stocks and other risk assets that have seen increased volatility due to rising interest rates. Higher interest rates can make it harder for a company to raise cash and expand. Higher bond yields can offer investors a viable alternative to investing in speculative stocks, disrupting the bull thesis for stocks.
With the 10-year US Treasury rate at 1.80% Monday morning, there's still a long way to go for bond yields to offer an attractive alternative that would lead to significant outflows from stocks and into bonds.

When the dot-com bubble began to deflate in 2000, the 10-year US Treasury yield was above 6 percent, giving investors a good safe haven to protect their gains from the tech boom.
The market rotation doesn't mean that investors with a long time horizon should leave. If your portfolio has been hurt by last week's market decline, a meaningful review is in order.

Russ Koesterich, a managing director at BlackRock, said that a change in the rate environment does lead to changing sectors and style preferences.

Diversification, which has been looked down upon by some meme-stock investors who like to "YOLO" on speculative stocks, is a crucial tool that can help investors weather market volatility, remain invested for the long-term, and not lose sleep at night.
Business Insider has an original article.