Gastric year for markets in 5 charts

New York

Wall Street is saying goodbye to 2022 — and it wants to leave well. It was a year most investors would like to forget.

Russia’s invasion of Ukraine, disruption of supply chains and yet another year of Covid have turned markets upside down this year. Inflation has risen around the world, and central banks have raised interest rates at a historic pace to keep price increases from spiraling out of control. China, the world’s second-largest economy, periodically shuts down entire cities to contain the pandemic. Power supplies were cut, but fears of a recession caused demand to fall in the second half of the year anyway. Strong storms and climate change have also roiled markets.

That left few safe places for investors to park their money this year.

The Dow fell 200 points, or 0.6%, on Friday, the last trading day of the year. For the year, the Dow is down more than 9%, its worst year since 2008.

The S&P 500 fell 0.7% on Friday, taking it down 19.9% ​​for the year.

The Nasdaq Composite Index fell almost 1% on Friday, nearing its lowest level since July 2020. The tech-heavy index fell 34% this year.

European stocks fell 11.8% for the year, posting their worst annual run since 2018.

And stocks had a miserable year, bonds got worse. Inflation, massive interest rate hikes and a super strong dollar make bonds unattractive to investors.

In 2022, the yield of the S&P US Treasury Bond Index was -10.7%. The 30-year US Treasury bond fell to a record low of -35%, the worst yield in a century. Corporate bonds also had a miserable 2022: bonds issued by S&P 500 companies yielded -14.2% this year. The Bloomberg Aggregate US Bond Index had its worst year since the index’s inception in 1977, according to FactSet.

Inflation in the United States, which briefly rose above 9% – the highest level in 40 years – hurt economic growth even as consumers continued to spend. But it hurt corporate profits more.

According to John Butters, chief earnings analyst at FactSet, earnings for S&P 500 companies are expected to grow just 5.1% this year, well below the 8.5% average annual growth Wall Street has posted over the past 10 years.

Energy, boosted by higher oil and gas prices earlier this year, accounted for all of Wall Street’s profit gains. Excluding energy, S&P 500 returns would have fallen 1.8% this year, Butters predicted.

Disappointing above-average earnings have sent shares down sharply for the year. Global stock markets have lost $33 trillion from their peaks.

Energy technology solutions company Generac Holdings is the worst-performing stock in the S&P 500 this year, down nearly 74%. In second place is dating app company Match Group, down 70%.

Growth stocks, or stocks of companies that are rapidly expanding their business, have been particularly hard hit. Investors value these firms based on their expectations of future earnings. In a world of rising interest rates, these look less attractive.

Elon Musk’s Tesla is down nearly 70%, making the auto tech company the third-worst performer this year. Facebook’s parent company, Meta, is also among the bottom 10 stocks, down 65%.

It’s a big shakeup: Earlier this year, Tesla was the fifth-most valuable company in the S&P 500, and Meta was sixth. Now Tesla is 11th in the index and Meta is 19th.

Even Amazon, Apple and Microsoft — the main tech names for investors — took big hits as investors adjusted to an environment of rising rates.

There were some winners. The energy sector has returned more than 60% this year, significantly outperforming all other S&P 500 sectors. To date, no other sector has gained even 5%.

Occidental Petroleum was the top gainer in the S&P 500 with a 122% year-over-year gain. Constellation Energy was second with a 109% increase, and Hess was third with a 94% increase.

As the shine faded from the markets, one of the biggest stories was the catastrophic collapse of cryptocurrencies. After a dramatic rally to record highs in 2021 (remember the dogecoin rally?), investors faced an epic crash. The implosion of parts of the industry once considered relatively stable, such as Sam Bankman-Fried’s FTX exchange, sent traders running for cover.

Crypto insiders admit that it will probably take years to restore confidence. As regulators make the rounds, the heady days of profiting from memes feel like a distant memory.

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