A version of this story first appeared in CNN Business’s Before the Bell newsletter. Not a subscriber? You can register right here. You can listen to the audio version of the newsletter by clicking the same link.
Long-winded writers who suffer from the tendency to provide copies that exceed their word count are often advised by editors to kill their loved ones – to throw out a huge amount of the stories that make them special. favourite.
Looks like Wall Street has embraced the concept, too. It’s been a miserable year for stocks in general – the S&P 500 is down about 20% in 2022 – but the big surprise is that almost The Shakespearean collapse of companies dominated the market for years.
What’s going on: It was a year of economic uncertainty, geopolitical turmoil, soaring inflation and a hawkish Fed. It’s not uncommon for markets to not perform well – the only thing that drives stocks in general from oblivion this year is the energy sector, up about 60% year-to-date.
But the most surprising are the giants of market capitalization, traditionally was expected to weather the storms of Wall Street well, but failed to weather the rising macroeconomic waves.
The Stalwarts – large, established companies with long-term growth potential, have been crushed. Just look at Apple. Even Prophet Warren Buffett himself thinks it’s a good idea to buy more Apple stock in early 2022, but the stock is now down 29% for the year (Buffet’s) Berkshire Hathaway
(BRKA) doing well, though, up more than 3% this year). Intel, another blue chip, fell 51%.
Tech companies have long been seen by investors as invincible money printers. That didn’t happen this year as shares of Alphabet fell nearly 40% and Microsoft
(MSFT) by 28%. Facebook’s parent company, Meta, which is down 64% this year in pursuit of its virtual reality dream, experienced its biggest drop in market value in a single trading day in February. The company lost $232 billion.
Other recent loved ones sent out this year – Moderna
(MRNA) once one of the best performers of 2021 thanks in large part to the covid vaccine, and now it’s one of the worst, down 24% this year.
(WMT)Large chain stores known for weathering many economic storms, are in the red this year, falling just under 2%.
Surprisingly on the positive side: There are already some companies that can continue to grow in 2022. Consumer staples posted their best relative performance against the S&P 500 since 2008 this year. Coca-Cola
(No) stocks, up nearly 8%, beat the market this year. Mondelez snack food company
(MDLZ) also increased by 1.5%.
(IBM)meanwhile, managed to grow in a year when the entire tech sector was faltering – the company was up almost 4%. Bernstein Research analysts wrote in a recent note that the company is “trading well above its historic range”. But “based on its defensive characteristics and historical performance, we believe that IBM
(IBM) there is good upside potential if we continue to pressurize the market and potentially lagging the major indexes if we enter a recovery phase,” they said.
Key point: The market has been full of surprises this year. Blue-chips are no longer in the blue, and safe-havens that were firmly bet just a year ago have plummeted. The question is whether this new market order will decline next year or if investment strategies have been permanently altered.
US shoppers are holding economic weight on their shoulders.
Just last month Bank of America CEO Brian Moynihan told CNN that the continued strength of the US consumer is almost single-handed prevent recession. According to National Retail Federation data, consumer spending is a key driver of the economy, and the last two months of the year could account for around 20% of total retail sales — even more for retailers. some retailers.
But while American bank accounts are still quite plentiful, they are starting to dry up. In the third quarter of 2022, credit card outstanding loans skyrocketed 15% annually. That was the biggest annual increase since the New York Fed began tracking the data in 2004.
“Against this platform, We expect consumers Gregory Daco and Lydia Boussour, economists at EY Parthenon, say they will limit spending further in the coming months. “Real consumer spending will grow modestly in the final quarter of the year, but we expect it to grow barely in 2023.”
EY Parthenon predicts that consumer spending will be flat in 2023 after growing 2.7% this year. Daco noted that persistent inflation, tighter financial conditions and weaker global growth could push the US into a mild recession in the first half of this year.
2022 has been a challenging journey and I’m grateful you’ve joined me for it. I hope that Before the Bell has helped you find some balance in this often meaningless good-is-bad and bad-is-good economy.
So as you count down to the New Year, take a moment to congratulate yourself – you’ve made it through the year. No matter what state your portfolio is in, you deserve a break and think about what you’ve dealt with.
Here’s a quick recap:
- US inflation hits 40-year high at 9.1%
- The unemployment rate hit 3.5% – it’s the lowest level since 1969.
- The 30-year US Treasury note fell to its lowest level, -35%, in a century.
- Global central banks raise interest rates more than 200 times
- Natural gas prices up 90%
- The global equity market has lost $33 trillion in capitalization from its peak.
Phew, someone give me a glass of champagne.
This is a better 2023, I’ll see you there.