2021 has been a bullish year for S&P 500 ETF (SPY) where it closed at 470.6 at the all-time high level before Christmas, hit a year-to-date gain of 27%.
Macro Environment for SPY in 2022
The Federal Reserve has been under pressure to raise the interest rate in response to rising inflation where the FED officials see as many as 3 rate hikes coming in 2022. Besides, the FED indicated that it will accelerate the tapering of monthly bond buying program in 2022. The FED plans to buy $60 billion worth of bonds each month starting in January 2022, down half the level from the previous amount it bought in November 2021, as reported by CNBC.
On top of that, the global money supply (M2) is expected to decelerate rapidly with acceleration of the reduction of the monthly bond purchasing.
The macro environment in 2022 such as the interest rate hike, acceleration on tapering of the bond buying program and shrinking of the global money supply are likely to pose a challenging environment to the S&P 500 ETF (SPY).
