(New York and Toronto) The New York Stock Exchange concluded its worst half since 1970 down on Thursday, little reassured by US inflation which remains high, encouraging the Federal Reserve (Fed) to continue its interest rate hikes.
Posted at 9:31 a.m.
Updated at 5:47 p.m.
Similar scenario in Toronto as the Canadian Stock Exchange’s flagship index concluded its worst quarter since the start of the pandemic.
Allan Small says the first half of 2022 was the worst period he’s seen in his 25-year investing career.
“As we reach the mid-point of the year, when you look back, I think the first part of the year will be known for being just a bloodbath for the markets,” Mr. Small said. , investment advisor at IA Private Wealth Management, during an interview.
The Toronto floor’s S&P/TSX Composite Index lost 217.28 points on Thursday to end the session with 18,861.36 points. It thus cumulates a quarterly decline of nearly 14%, the worst since December 2019.
According to final results, the Dow Jones index fell 0.8% to 30,775.43 points. The tech-heavy NASDAQ fell 1.3% to 11,028.74 points. The S&P 500 lost 0.9% to 3785.38 points.
“The efforts of the central bank [Fed] to fight inflation are fueling growing recession fears that have led Wall Street to its worst semester since 1970,” said Edward Moya, analyst for OANDA.
He added that “the salvo of American data”, in particular inflation and household spending published on Thursday, “made it clear that the risks of recession continue to grow”.
Record loss for NASDAQ
Compared to the start of the year, the TSX is down 11%. South of the border, the Dow Jones has fallen 15% since the end of 2021, while the S&P 500 plunged 20.6% – its worst half-year performance in 50 years – and the NASDAQ erased 29.5 %, a record.
“I can’t remember a year where the first six months went so badly,” said Small.
The Canadian market will be closed this Friday for the Canada Day holiday, while the US markets will be inactive for the Independence Day holiday, July 4.
Soaring inflation was fueled by Russia’s invasion of Ukraine, while supply chain bottlenecks were accentuated by China’s COVID-19 lockdowns.
While markets have suffered steep declines in the past due to COVID-19 and the financial crisis, they have always been limited by investors taking advantage of the bargains created. This time around, many investors remain on the sidelines, unsure of when markets will bottom.
Economic data released in the United States on Thursday indicated that core inflation, the Fed’s preferred measure of inflation, came in at 4.7% in May on an annual basis. This is 0.2 points lower than in April, but it still remains near 40-year highs.
In Canada, economic growth slowed in April to 0.3%, while a preliminary estimate for May suggests it likely contracted by 0.2%. The United States previously reported that its economy fell 1.6% in the first quarter.
Recession signals
A negative number in the second quarter would mean that the US economy is technically in recession. But Mr. Small pointed out that many people think the US economy is already there and that Canada is either in recession or about to be.
Canada’s real estate and utilities sectors were the only ones in positive territory on Thursday, while the other nine fell more than 1%.
The healthcare group saw the largest decline, losing 4.1%.
The Materials sector returned 3.6% as metal prices fell, especially copper.
The price of gold fell US$10.20 to US$1807.30 an ounce on the New York Commodities Exchange, and that of copper fell 7.1 cents US, at US$3.71 per pound.
“When you fear a recession, you fear that these metals, used to build houses and other things, will not be used as much anymore,” Small said.
The energy sector fell 1.7%, slipping along with the price of crude oil.
In the currency market, the Canadian dollar traded at an average rate of 77.60 US cents, down from 77.65 US cents the day before.
Mr. Small hopes that the second half of the year will go better, once the central banks have finished their aggressive campaign of raising interest rates to tame inflation.
I don’t know if we’ll recover enough to make a gain for the year, but I’m optimistic that the second half of the year will be positive and that it will recover some of the losses.
Allan Small, Investment Advisor at IA Private Wealth Management
As quarterly earnings season approaches, strategists are starting to cut their forecasts, especially in the tech sector.
To top it all off, and reflecting the loss of risk appetite, cryptocurrencies were doing “very badly”, with bitcoin falling well below US$20,000 to US$18,960 (just over $24,000). CAN).