Goodbye 2022 – and good riddance. Markets close their worst year since 2008

New York
CNN
—

Wall Street has said goodbye — and good riddance — to 2022, a year most investors would rather forget.

All three major averages were down on Friday, recording their worst year since 2008 and ending a three-game winning streak.

The Dow fell 73 points, or 0.2% on Friday, the last trading day of the year. In 2022, the Dow Jones fell about 9%.

The S&P 500 was down 0.3% on Friday, leaving it down about 20% for the year.

The Nasdaq Composite Index was down 0.1% on Friday, near its lowest level since July 2020. The tech-heavy index has been beaten this year, falling 33%.

European stocks also ended the year on a sour note, down 11.8% in their worst annual run since 2018.

Russia’s invasion of Ukraine, blocked supply chains and another year of Covid have shaken markets this year. Inflation surged around the world and central banks raised rates at a historic pace to keep price increases from spiraling out of control. China, the world’s second-largest economy, periodically closes entire cities to contain the pandemic. Energy supply has been cut, but recession fears are causing demand to plummet in the second half anyway. Intense storms and climate change have also upset markets.

This left few safe places for investors to park their money.

And while the actions had a miserable year, bonds did even worse. Inflation, massive rate hikes and an extremely strong dollar made bonds unattractive for investors.

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

Inflation, which briefly exceeded 9% in the United States – a 40-year high – hurt economic growth, even as consumers continued to spend. But it mostly hurt corporate earnings.

Earnings for S&P 500 companies are expected to have risen just 5.1% this year, well below the average annual increase of 8.5% recorded by Wall Street over the past 10 years, according to analyst John Butters. mainstay of profits at FactSet.

Energy, which boomed with soaring oil and gas prices earlier this year, made up all of Wall Street’s earnings gains. Excluding energy, S&P 500 earnings would have fallen 1.8% this year, Butters predicted.

Average to miserable earnings sent stocks tumbling throughout the year. Global stock markets have lost $33 trillion in value since their peaks.

Generac Holdings, an energy technology solutions company, is the worst performing stock in the S&P 500 this year, down about 74%. Dating app company Match Group comes in second, down 70%.

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

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 makes an appearance in the Last 10 stocks – down 64% in 2022.

It’s a huge shake-up: At the start of this year, Tesla was the fifth most valuable company in the S&P 500 and Meta the sixth. Tesla is now the 11th most valuable company in the index and Meta is in 19th place.

Even Amazon, Apple and Microsoft — tech names that have become staples for investors — took a big hit as investors adjusted to an environment of rising rates.

There have been winners. The energy sector has returned more than 60% this year, significantly outperforming all other sectors in the S&P 500. No other sector has gained even 5% since the start of the year.

Occidental Petroleum has been the biggest gainer in the S&P 500, up around 120% this year. Constellation Energy is in second place, up around 110%, and Hess comes in third with a gain of around 95%.

As the shine in the markets stood out, one of the biggest stories was the disastrous collapse of cryptocurrencies. After a dramatic surge in 2021 to record highs (remember the dogecoin rally?), investors faced an epic meltdown. The implosion of parts of the industry once considered relatively stable, such as Sam Bankman-Fried’s FTX exchange, has caused traders to take shelter.

Crypto insiders acknowledge that it will likely take years to rebuild trust. As regulators spin in circles, the heady days of meme profit-minting seem like a distant memory.