Equities, corporate bonds, government bonds, cryptocurrencies – there was no security for investors in the first half of 2022.
Almost every asset class ended deep in the red as a perfect storm of runaway inflation, slowing global growth, war, an energy crisis, a food crisis, supply chain stumbling blocks and central bank tightening hit the markets.
It’s “a bit of a horror story,” concluded Jim Reid, part of Deutsche Bank’s thematic research team, in a note to clients this morning. “For what it’s worth, the S&P 500 has now experienced its worst H1 total return performance in 60 years. And in terms of total returns, it’s also fallen for the first straight quarter since [global financial crisis]. Meanwhile, 10-year Treasuries appear … to have posted their worst H1 since 1788, just before George Washington became President.”
What does the worst performance in 60 years actually look like? Let’s get straight to the numbers.
If you hold long dollars and crude oil as safe havens, your portfolio will outperform the crowd. The US benchmark West Texas Intermediate (WTI) is up 39% for the year and the greenback has far outperformed world currencies so far. Congratulations.
But if you’re heavily invested in bitcoin, tech stocks, blue chips, Asian stocks, you name it – it was a forgettable first half.
Looking more closely at stock sectors, only one of the 11 sectors on the S&P 500 is in positive territory for 2022.
Few groups have been hit harder than crypto bulls. Bitcoin fell almost 60% in the first half. This was hardly the worst performance for virtual coins in the first six months of 2022.
It’s also been an ugly first half for bondholders as the closely watched 10-year Treasury is now down 9.4% yoy. According to Bloomberg, this is the first time in 48 years that both stocks and bonds have fallen in the same period, dealing another blow to the tried and tested 60/40 stock-to-bond investment strategy.
And the worst performing stock is…?
Here are more unsightly nuggets to describe the first half of 2022:
- As Deutsche Bank’s Reid said above, one would have had to hop in a time machine and travel back to George Washington’s America, to 1788, to catch a glimpse of a worse first half for the country’s Treasury bondholders. Charlie Bilello, founder of Compound Capital Advisors, has an even darker assessment. He runs the numbers and sees the bond market on track for its worst year ever.
- The S&P’s first-half performance is the sixth-worst in history. It fared even worse – much worse (-37%) – in 2008, at the height of the global financial crisis, Bilello calculates.
- Which S&P stock performed the worst in the first half of the year? This achievement goes to Netflix. The streaming service is down 70.4% year-to-date. Etsy, Align Technology, PayPal and Bath & Body Works round out the worst five of 2022.
- And which stocks are in the top 5? They are all in the oil and gas sector, with Occidental Petroleum leading the way, up 104.7% this year.
looking ahead
History shows that bear markets last about 16 months on average. That would suggest investors are stuck in the first half of an uncertain period, especially as the odds of a recession continue to rise.
Michael Burry from The great short film Celebrities, we’re about halfway through this bear market.
As of 5 a.m. ET, S&P futures were trading 0.3% lower as all three major indices were in the red. The dollar was also higher. Over in Europe, stocks were flat but off previous lows.
look at that wealth Essential reading: “Profit warnings, recession fears and layoffs — despite the carnage, Wall Street analysts still advise investors to buy, buy, buy stocks”
