The year 2022 on Wall Street, which ends on Friday, will be remembered as a “terrible” stock year that investors are eager to forget without being sure of seeing the end in 2023.
Overall, shares of the New York Stock Exchange lost “20% of their value, which is the fourth largest stock loss in history since World War II,” CFRA chief strategist Sam Stovall summarized for AFP. “It’s a terrible year,” added this specialist in historical stock market statistics.
The 2022 rout on Wall Street comes behind the 2008 housing and financial crisis when the stock market fell 38.5%, then the crash of 1974 when it fell 29.7%, and finally the implosion of the internet bubble of 2002, when the market had shrunk by 23.4%. The indices started in the red on Friday, with the Dow Jones shedding 0.76%, the Nasdaq 0.82% and the S&P 500 0.90% at 16:05 GMT.
It was stubborn inflation, at a 40-year high and, in response, the drastic change in attitude of the US Central Bank (Fed) that signaled the end of the party for investors. US price inflation peaked at 9.1% in June, according to the CPI. To counter it, the Fed began aggressively raising overnight interest rates in March, which rose from zero to 4.50% in a few months, which immediately cooled investments on the stock exchange.
More expensive money
Because with an increase in the cost of money, it is the investments of companies, especially those in the tech sector, that are affected, and therefore their future profits. As of Thursday’s close, the Nasdaq index, where popular tech stocks are concentrated, was down 33% this year. The Dow Jones fell 8.5% and the broader S&P 500 index, the most representative of the American market, fell 19.2%. The emblematic stocks of the sector have drunk the cup, such as Tesla, down 65% in one year, but also Apple (-24% as of December 29) or Meta (-63%). On paper, the fortunes of their billionaire founders have shrunk—by half for Facebook’s Mark Zuckerberg, or nearly half for Amazon’s Jeff Bezos. At the same time, the dollar has strengthened to return to a level of parity with the euro not seen for 20 years.
As for the latest investment buzz, cryptocurrencies, they have suffered a major debacle. From $46,000 in March, bitcoin fell below $20,000 three months later and is now trading around $16,000.
Finished soon?
“The good news is that this year is almost over,” joked Art Hogan of B. Riley Wealth Management. “The bad news is that 2023 could be bumpy, at least for the first few months,” with the prospect of a recession in the US economy. The historical precedents also have Sam Stovall (CFRA) say that “we risk going even lower because we have not yet seen the traditional capitulation of Wall Street” where the selling is accelerating. In the usual cases of the end of a severe bear market, the VIX volatility index rises to around 40. But it is at 21 these days, the expert also underlines.
Furthermore, whenever inflation exceeds 6%, “it is accompanied by a recession with a bear market,” he predicts. He therefore believes that stock market indices “will return to lows again during the first half of 2023”. Maris Ogg, portfolio manager at Tower Bridge Advisors, is more optimistic. “I think inflation will be under control, the Fed will be successful and 2023 will look more like a normal year,” she said.
Once the recession is over, if any, the market’s recovery could be swift, warns Sam Stovall, noting that the speed with which investors can take advantage of low stock prices “is astonishing.” He therefore advises investors and traders not to be “stuck in cash when the market reverses.”
Overall, shares of the New York Stock Exchange lost “20% of their value, which is the fourth largest stock loss in history since World War II,” CFRA chief strategist Sam Stovall summarized for AFP. “It’s a terrible year,” added the historical stock statistics specialist: 1974 when the decline was 29.7%, and finally the internet bubble implosion of 2002, when the market melted by 23, 4%. The indices started in the red on Friday, the Dow Jones lost 0.76%, the Nasdaq 0.82% and the S&P 500 0.90% at 16:05 GMT yr and, consequently, the drastic change of attitude of the American Central Bank (Fed) which marked the end of the party for investors. US price inflation peaked at 9.1% in June, according to the CPI. To counter it, the Fed began in March to aggressively raise overnight interest rates, which went from zero to 4.50% in a few months, which immediately cooled investments on the stock exchange. in the technology sector, and therefore their future profits. As of Thursday’s close, the Nasdaq index, where popular tech stocks are concentrated, was down 33% this year. The Dow Jones fell 8.5% and the broader S&P 500 index, the most representative of the American market, fell 19.2%. The emblematic stocks of the sector have drunk the cup, such as Tesla, down 65% in one year, but also Apple (-24% as of December 29) or Meta (-63%). On paper, the fortunes of their billionaire founders have shrunk—by half for Facebook’s Mark Zuckerberg, or nearly half for Amazon’s Jeff Bezos. At the same time, the dollar has strengthened to regain a level of parity with the euro not seen in 20 years. As for the latest investment in vogue, cryptocurrencies, they have experienced a major debacle. From $46,000 in March, bitcoin fell below $20,000 three months later and is now trading around $16,000. “The good news is that this year is almost over,” jokes Art Hogan of B. Riley Wealth Management. “The bad news is that 2023 could be bumpy, at least for the first few months,” with the prospect of a recession in the US economy. The historical precedents also have Sam Stovall (CFRA) say that “we risk going even lower because we have not yet seen the traditional capitulation of Wall Street” where the selling is accelerating. In the usual cases of the end of a serious “bear market”, the VIX volatility index rises to around 40. But it is at 21 these days, the expert also underlines, that every time inflation rises above 6% , “is accompanied by a recession with a bear market,” he predicts. He therefore believes stock indices “will return to lows again during the first half of 2023.” Maris Ogg, portfolio manager at Tower Bridge Advisors, is more optimistic. ” I think inflation will be under control, the Fed will be successful and 2023 will look more like a normal year,” says the specialist. Once the recession passes, if any, the market recovery could be rapid, warns Sam Stovall, noting that the speed with which investors can take advantage of low stock prices “is astounding.” He therefore advises investors and traders not to be “cash-locked when the market reverses.”
