US stocks are experiencing their worst year since the financial crisis: markets turning

US stocks are experiencing their worst year since the financial crisis: markets turning

(Bloomberg) — US stocks fell on the last trading day of 2022, closing the worst year in more than a decade for global stocks and bonds.

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Even after a rally in buying on the dip in the last hour of trading, the S&P 500 ended lower for a third day in the shortened week, leaving the benchmark down nearly 20% in 2022. The Nasdaq 100 closed lower, shedding a third of its value this year as Technology stocks have emerged as one of the most vulnerable groups.

In a familiar guide to 2022, Treasury yields rose in the last trading day, with the 10-year interest rate hitting a seven-week high. The dollar extended its decline, with the Bloomberg Spot Dollar Index dropping to a six-month low.

Losses this week dashed hopes of a rally towards the end of 2022 – the year in which inflation reasserted itself wiping out a fifth of its value from global stocks, the worst wave since the financial crisis. Bonds lost 16% of their value, the biggest drop since 1990 for at least one major measure, as central banks scrambled to slow rising consumer prices by raising interest rates around the world.

“We’ve never seen a market environment like this where stocks and bonds are down simultaneously,” said Art Hogan, chief market strategist at B. Riley Wealth. “The good news is that we will soon be putting the year in the rearview mirror. The bad news is that 2023 may have a bumpy ride, at least in the first few months. Weaker economic trends are likely to form heading into 2023 as the Fed battles inflation, but A moderate recession could help lift inventories for a better second half of the year.”

Read more: As 2022 markets part ways, one deal made all the difference

Concern about the spread of Covid-19 that emerged this week also weighed on markets, with The Times reporting that the UK will require all travelers arriving from China to test negative for Covid. The European Commission has asked EU member states to review Covid testing procedures and sequencing and consider expanding them amid growing concerns about the spread of the virus from China.

Read more: Risks of Covid surge is the main driver behind travel restrictions in China

After a banner year for stocks in 2021 that saw the S&P 500 climb to consecutive record highs, expect a bit of the ensuing sell-off. But after surging to another all-time high on January 3rd, fortunes quickly turned around as the Federal Reserve signaled its intent to rein in inflation. That heralded the start of the most aggressive course of rate hikes in decades, leaving stocks and bonds plummeting in its wake.

With US stocks dragged into a bear market, the decline in Treasury bonds sent record 10-year yields to 3.8% from 1.5% at the start of the year. That could offer a different outlook for fixed income in 2023 and a revival of the widely followed 60/40 portfolio reached in 2022.

“While stocks will struggle with slowing economic activity and missing out on profits swelled by inflation, bonds are making a decent income with the potential for higher prices as yields fall below their peak,” said Brice Doty, portfolio manager at Sit Investment Associates. “The Fed is almost done raising interest rates – we don’t expect a hike at the May meeting – and inflation is slowing.”

Read more: Treasury strategists expect lower returns and steeper curve in 2023

Some of the major movements in the markets:

Stores

  • The S&P 500 is down 0.3% as of 4 pm New York time

  • The Nasdaq 100 fell 0.1%.

  • The Dow Jones Industrial Average fell 0.2%.

  • MSCI World Index fell 0.2%

currencies

  • The Bloomberg Spot Dollar Index fell 0.4%.

  • The euro rose 0.4 percent to $1.0705

  • The British pound rose 0.3% to $1.2088

  • The Japanese yen rose 1.3 percent to 131.25 per dollar

Digital currencies

  • Bitcoin changed little at $16,598.9

  • Ether rose 0.4% to $1,199.1

bonds

  • The yield on the 10-year Treasury note advanced six basis points to 3.87%.

  • Germany’s 10-year yield advanced 13 basis points to 2.57%.

  • The yield on the 10-year UK Bund advanced 1 basis point to 3.67%.

goods

  • West Texas Intermediate crude rose 2.6 percent to $80.41 a barrel

  • Gold futures rose 0.2 percent to $1,829.90 an ounce

This story was produced with help from Bloomberg Automation.

– With assistance from Jan-Patrick Barnert, Richard Henderson, Vildana Hajric, Robert Brand, and Peyton Forte.

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