Some early gains on Wednesday raised hopes that markets might still have a Santa Claus rally after all. However, any optimism was quickly dashed as major market indices fell in light trading after the latest housing data fueled fears of a potential recession in the new year.
Looking at the economic data, the National Association of Brokers (opens in new tab) said this morning that pending home sales fell 4% month on month in November, marking their sixth consecutive decline. “The level of home sales ahead of November plummeted near pandemic lows as the housing market cools,” said Jeffrey Roach, chief economist at LPL Financial. “As a leading indicator for the residential real estate market, the low home sales in anticipation should inform investors that we probably haven’t seen the bottom yet.”
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And it wasn’t just the dismal housing numbers that caused stocks to drop today. “The market understandably appears exhausted, is not expecting another major technical rally and is just hoping to reach Friday afternoon with no further significant losses,” said Louis Navellier, chairman and founder of Navellier & Associates. “Most of the major uncertainties of the year: China COVID, the war in Ukraine, tight energy supplies and aggressive central banks await us on the other side.”
The technically heavy Nasdaq composite once again led the trail down, losing 1.4% to 10,213, as heavyweights in the index Apple (AAPL (opens in new tab)-3.1%) and Amazon.nl (AMZN (opens in new tab), -1.5%) decreased. The wider S&P 500 index (-1.2% on 3,783) and the blue chip Dow Jones Industrial Average (-1.1% at 32,875) also ended in the red.
Why Investors Should Look to Buffett
A remarkable progress today was Tesla (TSLA (opens in new tab)), which then recovered by 3.3% Tuesday’s brutal sale. But while Tesla stock is on track to drop nearly 68% by the end of 2022, it remains “a perennial favorite among investors,” said Susannah Streeter, senior investment and market analyst at Hargreaves Lansdown, summarizing some of the biggest price moves of the past year.
The analyst adds that Meta platforms (META (opens in new tab)) is another previous high-flyer that has lost value dramatically in 2022.”[B]but some investors will have bought [META stock] to take advantage of the stock’s decline in hopes that fortunes will change as the company is restructured.”
As for those who artfully maneuvered the extreme volatility of the 2022 stock market, Streeter points to Warren Buffett’s Berkshire Hathaway (BRK.B (opens in new tab)). The holding company “remains a top choice for investors hoping the sure hand of the Wise of Omaha will see them through the storms ahead.” Buffett and his lieutenants did a lot of bargain hunting in 2022 as the stock market plummeted. Berkshire increased exposure to energy supplies Through increasing interests in Occidental Petroleum (OXY) and Chevron (CVX (opens in new tab)), and added to his bets on the technology sector via a Q3 purchase of Taiwan Semiconductor (TSM) stock. To see the other stocks that Buffett & Co. thinks they are worth their time, take a look at the whole Berkshire Hathaway Stock Portfolio.