The stock market witnessed a notable shift in the first half of 2022, driven by record-high inflation and a significant rise in interest rates. The Consumer Price Index (CPI) accelerated 9.1% year-over-year in June, exceeding the 8.8% Dow Jones estimate and marking the fastest pace for inflation since November 1981.
Moreover, the persistently high inflation prompted the Federal Reserve to adopt a more hawkish stance toward monetary policy. The central bank raised the benchmark interest rates four times this year, the last two being as high as 75 basis points. The rising rate environment has increased borrowing costs for businesses, leading to economic contraction for two consecutive quarters.
