The year 2022 on Wall Street, which ends on Friday, will be remembered as a “terrible” stock market vintage that investors are eager to forget, without being certain of seeing quite the end in 2023. .
Overall, shares on the New York Stock Exchange lost “20% of their value, which is the fourth largest stock market loss in history since the Second World War”, summarized for Agence France-Presse Sam Stovall, chief strategist at CFRA.
“It’s a terrible year,” added this specialist in historical stock market statistics.
The rout of 2022 on Wall Street ranks behind the real estate and financial crisis of 2008 when the stock market lost 38.5%, then the crash of 1974 when the fall was 29.7%, and finally the implosion of the Internet bubble of 2002, when the market had shrunk by 23.4%.
The indices started in the red on Friday, with the Dow Jones losing 0.76%, the Nasdaq 0.82% and the S&P 500 0.90% at 11:05 a.m. local time.
It was stubborn inflation, at its highest for forty years and, in response, the drastic change in attitude of the American Central Bank (Fed) which signaled the end of the party for investors. US price inflation peaked in June at 9.1%, according to the CPI index.
To combat it, the Fed began in March to aggressively raise overnight interest rates, which rose in a few months from zero to 4.50%, which immediately cooled stock market investments.
More expensive money
Because with an increase in the cost of money, it is the investments of companies that suffer, particularly those in the tech sector, and therefore their future profits.
As of Thursday’s close, the Nasdaq index, where popular technology stocks are concentrated, has tumbled 33% this year. The decline in the Dow Jones was 8.5% and the broader S&P 500 index, the most representative of the American market, fell 19.2%.
The emblematic stocks of the sector drank the cup, like Tesla, down 65% over one year, but also Apple (-24% on December 29) or Meta (-63%).
On paper, the fortunes of their billionaire founders have shrunk, by half for Facebook’s Mark Zuckerberg, or nearly half for Amazon’s Jeff Bezos.
At the same time, the dollar strengthened to return to a level of parity with the euro that has not been seen for 20 years.
As for the latest investments in vogue, cryptocurrencies, they have experienced a severe debacle. From $46,000 in March, bitcoin fell below $20,000 three months later and is now trading around $16,000.
Soon finished?
“The good news is that this year is almost over,” quipped Art Hogan of B. Riley Wealth Management.
“The bad news is that 2023 could be bumpy, at least for the first few months,” with the prospect of a recession in the US economy.
The historical precedents also make Sam Stovall (CFRA) say that we “risk going even lower, because we have not yet seen the traditional Wall Street capitulation” where sales are accelerating.
In the usual cases of the end of a severe “bear market”, or bear market, the VIX volatility index climbs around 40. However, it is at 21 these days, also underlines the expert.
In addition, each time inflation sets in over 6%, “it is accompanied by a recession with a bear market,” he predicts. He therefore believes that the stock market indices “will still test lows during the first half of 2023”.
Maris Ogg, portfolio manager at Tower Bridge Advisors, is more optimistic. “I think inflation is going to be under control, the Fed is going to be successful and 2023 is going to look more like a normal year,” says the specialist.
Once the recession is over, if any, the market’s recovery could be quick, warns Sam Stovall, noting that the speed at which investors can take advantage of low stock prices “is amazing”.
He therefore advises investors and stockbrokers not to be “locked in cash when the market is going to reverse”.