Wall Street says goodbye – and cleaned up – to 2022. It’s been a year most investors would rather forget.
Russia’s invasion of Ukraine, growling supply chains and another year of Covid are rocking markets this year. Inflation skyrocketed around the world and central banks raised interest rates at a historic rate to prevent price increases from spiraling out of control. China, the world’s second-largest economy, has periodically shut down entire cities to contain the pandemic. The energy supply was cut off, but due to fears of a recession, demand will fall anyway in the second half of the year. Violent storms and climate change also rocked markets.
This 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. Over the course of the year, the Dow fell more than 9%, its worst year since 2008.
The S&P 500 was down 0.7% on Friday, holding it down 19.9% for the year.
The Nasdaq Composite Index fell nearly 1% on Friday, close to its lowest level since July 2020. The tech-heavy index has been battered this year, falling 34%.
European equities ended the year down 11.8%, securing their worst annual run since 2018.
And while stocks had a miserable year, bonds fared even worse. Inflation, massive rate hikes and a super strong dollar made bonds unattractive to investors.
The return on the S&P US Treasury Bond Index was -10.7% in 2022. The 30-year US Treasury bond bottomed out to its worst return, -35%, in a century. Corporate bonds also had a miserable 2022: the yield on bonds issued by S&P 500 companies amounted to -14.2% this year. According to FactSet, the Bloomberg Aggregate US Bond Index had its worst year since the index was launched in 1977.
Inflation short rose above 9% in the United States — a 40-year high — hurt economic growth even as consumers continued to spend. But it mostly hurt corporate profits.
According to John Butters, senior earnings analyst at FactSet.
Energy, which boomed when oil and gas prices rose sharply earlier this year, made up Wall Street’s entire profit gain. Excluding energy, S&P 500 earnings would have fallen 1.8% this year, Butters predicted.
Mediocre to miserable earnings sent stocks sharply lower throughout the year. Global stock markets lost $33 trillion in value from their peaks.
Generac Holdings, an energy technology solutions company, is the worst performing stock in the S&P 500 this year, down about 74%. In second place is dating app company Match Group, down 70%.
Growth stocks, or stocks of companies that are rapidly expanding their businesses, were particularly hard hit. Investors value these companies based on expectations for future earnings. They look less attractive in a world where interest rates are rising.
Elon Musk’s Tesla is down about 70%, making the auto tech company the third worst performer this year. Meta, Facebook’s parent company, also appears in the bottom 10 stocks — down 65%.
That’s a huge shake-up: At the start of the year, Tesla was the fifth most valuable company in the S&P 500 and Meta was sixth. Tesla is now the 11th most valuable company in the index and Meta is 19th.
Even Amazon, Apple, and Microsoft — technology names that have become staples for investors — have taken major hits as investors adapted to an environment of rising interest rates.
There were some winners. The energy sector has returned more than 60% this year, significantly outperforming any other S&P 500 sector. No other sector has gained even 5% year-to-date.
Occidental Petroleum was the biggest gainer in the S&P 500, up 122% year-to-date. Constellation Energy is in second place, up 109%, and Hess comes in third with a gain of 94%.
When the shine came off the markets, one of the biggest stories was the disastrous collapse of cryptocurrencies. After a dramatic run-up to record highs in 2021 (remember the dogecoin rally?), investors faced an epic collapse. The implosion of parts of the industry once considered relatively stable, such as Sam Bankman-Fried’s FTX Exchange, sent merchants to take cover.
Crypto insiders recognize that it will likely take years to rebuild trust. As regulators circle around, the heady days of slapping profits on memes feel like a distant memory.