Since 2019, stock market returns have generally been excellent. Even in 2020, when all three indexes significantly declined in the first quarter due to the onset of COVID, the stock market began looking forward to a post-COVID recovery. For the full year, the S&P 500 increased 16.26 percent and the Russell 2000 was up 18.36 percent, both higher than their historical average annual return. The NASDAQ increased an amazing 43.64 percent. Through early November 2021, the year-to-date returns once again remain strong, with each index increasing approximately 20%. Certainly, there have been ups and downs, but generally the market has been looking forward with an expectation for sound economic growth.
U.S. Stock Market Returns (Source: Morningstar)
2020 Q1
2020 Q2
2020 Q3
2020 Q4
2021 Q1
S&P 500 NASDAQ
-20.00 -14.18 -30.89
19.95 30.63 25.00
8.47
11.69 15.41 30.99
5.77 2.78
11.02
Russell 2000
4.60
12.44
*year-to-date return as of November 2
For workers invested in the stock market, that strong performance has provided some financial flexibility through increased investment account balances, which in turn can affect the work decision. Inflation Overview There are two broad factors that affect prices – supply and demand. Generally, inflation is caused when there is a change to one of these factors. If the supply of goods is reduced for a given demand, prices (inflation) will increase until a higher price level is reached that balances the demand to match the reduced supply. If the demand for goods is increased for a given supply, prices (inflation) will increase until a higher price level is reached that balances the supply of goods to match the increased demand. The chart below shows the 12-month change in the Consumer Price Index (CPI) over the past ten years. The change in the CPI is used to measure the rate of inflation, which is the percentage change in prices. Generally, the rate of inflation varied between 1% and 3% over the past decade, although the rate approached 4% in late 2011 as the economy rebounded following the financial crisis. After a January 2012 rate of 3.0%, inflation remained below 3.0% through 2020. In 2020, inflation dipped below 1% due to the severe economic contraction caused by COVID.
12-month Percent Change in CPI for all Urban Consumers, October 2011–October 2021 Source: Bureau of Labor Statistics and Federal Reserve Economic Database
Central Wisconsin Report - Fall 2021
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