Wall Street’s performance in the first half of 2022 has not been on par and has not been seen since the 1970s. The S&P 500 and Nasdaq 100 were down nearly 20.58% and 29.51 % respectively as of June 30, 2022.
Most stocks in the tech-heavy Nasdaq 100 index have fallen sharply since January of this year. Whether it will be on track for its biggest decline over the calendar year remains to be seen. The Nasdaq 100 is now trading at around 19.2 times estimated earnings, well below a 2020 peak above 31, and below its 10-year average of around 20.1.
The energy sector – a leader at the start of 2022 – was the biggest laggard in the S&P 500, falling 17% in June while maintaining gains of more than 29% since the start of the year. And while all 11 major S&P 500 sectors ended June with losses, the defensive sectors of healthcare, consumer staples and utilities, generally seen as more resilient in a downturn, outperformed.
The “Buy-the-dip” strategy may have taken a break from most investors, as bear market rallies are considered a “sell-the-rally” mode. The S&P 500 is also in bearish territory for the second time since 2020, having plunged more than 20% from its January peak.
However, there could be a silver lining if the story suggests anything. The benchmark US equity index lost 21% in the first half of 1970, during a period of high inflation to which the current environment has been compared. It jumped 27% in the last six months of this year.
Currently, inflation, rate hikes, recession fears have gripped market sentiment. It remains to be seen how far the rate increases before inflation is brought under control. New data reflects still high inflation rates and a decline in real consumer spending which is also easing recession fears and a stagflation environment.
Crude futures are hovering around $105 a barrel and closed their first monthly decline since November 2021. Bitcoin prices fell below $19,000, bitcoin’s nearly 60% drop since late March being the largest since the third quarter of 2011. Mark Mobius, who co-founded Mobius Capital Partners after spending more than three decades at Franklin Templeton Investments gets a sense of Bitcoin prices by correlating it to stock price movement. “Cryptocurrencies are a measure of investor sentiment. “Bitcoin goes down, the next day the Dow Jones goes down. This is the pattern you get. It shows that Bitcoin is a leading indicator,” Mobius says.