How the Federal Reserve affected 2022’s stock market

The Federal Reserve, over its more than centurylong existence, has emerged as a leading force in the stock market.

This stature was bolstered by the central bank’s adoption of two unconventional policy tools in the 2000s – large-scale asset purchases and forward guidance.

Large-scale asset purchases refer to the Fed’s emergency buying of government debt and mortgage-backed securities. Forward guidance refers to the central bank’s public communications about the future trajectory of monetary policies. The guidance often hints at the expected path of the federal funds interest rate target in advance of a policy change.

Central bankers in 2022 repeatedly told the public to expect tighter…