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Editors advise detailed writers who suffer from a tendency to publish texts that exceed the number of words they demand, to kill the ones they love, especially to discard the large piles of stories they love.
Wall Street seems to have embraced this concept as well. It’s been a miserable year for stocks overall – the S&P 500 is down nearly 20% in 2022 – but the big surprise is that it’s almost The Shakespearean collapse of companies that have dominated markets for years.
Investors are rushing to kill their favorites—that is, sell their shares—and even safe havens like Apple (AAPL) and Intel (INTC) are being crushed in a stampede.
What is happening: It’s been a tumultuous year filled with economic uncertainty, geopolitical chaos, high inflation and a hawkish Fed. No wonder the markets are not doing well – the only thing driving stocks in general The energy sector, which has sunk into oblivion this year, has increased by approximately 60% from year to year.
But the most surprising thing is that traditionally high-value giants Expected to weather the storms on Wall Street well, it hasn’t been able to withstand the rising macroeconomic waves.
Stalwarts – large, established companies that offer long-term growth potential were crushed. Just look at Apple. Even Oracle itself Warren Buffett thought it was a good idea to buy more Apple stock in early 2022, but the stock is now down 29% for the year (Buffet’s Berkshire Hathaway (BRKA) in good condition, increased by over 3% this year). Intel, another blue chip, dropped 51%.
Tech companies have long been viewed by investors as invincible, essentially money-printing machines. That hasn’t been the case this year, as Alphabet stock has dropped nearly 40% and Microsoft (MSFT) 28%. Facebook’s parent company Meta has tumbled 64% this year as it pursued its virtual reality dreams and suffered the biggest drop in market cap in a single trading day in February. The company lost $232 billion.
Other recent darlings have made the leap this year – Moderna (MRNA) was one of the best performing stocks of 2021, thanks in large part to the covid vaccine, and is now among the worst, down 24% this year.
Even big chain Walmart (WMT), known for weathering many economic storms, is in the red, down just under 2% this year.
Positively surprising: There have been some companies that have been able to keep moving forward in 2022. Core consumer products reported their best relative performance this year compared to the S&P 500 since 2008. Coca-Cola (KO) shares have swept the markets, up nearly 8% this year. Snack food company Mondelez (MDLZ) also rose 1.5%.
Meanwhile, IBM (IBM) managed to grow in a year when the entire technology industry faltered – the company grew by about 4%. Bernstein Research analysts wrote in a recent note that the company “traded well above its historical range.” But “given its defensive characteristics and historical performance, we believe IBM (IBM) will perform well if we continue to have markets under pressure and will lag behind major indices if we enter a recovery period,” they said.
Underline: The markets are full of surprises this year. Blue chips are no longer blue, and the safe havens that were sure bets just a year ago have dropped. The question is whether this new market order will pull back next year or whether investment strategies have been changed permanently.
American shoppers bear the burden of the economy on their shoulders.
Just last month, Bank of America CEO Brian Moynihan told CNN that the continued strength of the US consumer has almost single-handedly fended off the recession. Consumer spending is a major driver of the economy and can account for around 20% of total retail sales for the last two months of the year – even more for some retailers, according to National Retail Federation data.
But American bank accounts are starting to dwindle, though still pretty solid. Credit card balances increased by 15% year-over-year in the third quarter of 2022. This is the biggest annual jump since the New York Fed started tracking data in 2004.
“In this context, we expect consumers to further rein in their spending in the coming months,” said EY Parthenon economists Gregory Daco and Lydia Boussour. “Real consumer spending should see moderate growth in the last quarter of the year, but we barely expect it to grow in 2023.”
My colleague Alicia Wallace says consumers could start to run out at the worst time, as interest rates are poised to rise in 2023 and economic uncertainty is certain to increase.
EY Parthenon forecasts consumer spending to remain flat in 2023 after growing 2.7% this year. Daco noted that persistent inflation, tighter financial conditions and weaker global growth could help push the US into a mild recession in the first half of the year.
2022 has been a crazy journey and I am so grateful you joined me for it. Hopefully, Before the Bell has helped you gain some balance in this generally ridiculous good is bad and bad is good economy.
As you count down to the New Year, please take a moment to congratulate yourself – you survived this year. Whatever state your portfolio is in, you deserve to take a breather and reflect on what you’re dealing with.
Here is a quick summary:
- US inflation hits 9.1%, highest level in 40 years
- The unemployment rate has reached 3.5% – the lowest level since 1969.
- The 30-year U.S. treasury bond fell to -35%, the lowest yield in the last century.
- Global central banks have increased interest rates more than 200 times
- Natural gas prices increased by 90 percent
- Global stock markets have lost $33 trillion in capitalization since their peak.
Phew, somebody get me a glass of champagne.
See you there for a better 2023.