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United StatesThe New York Stock Exchange in 2022, a “terrible” vintage
Investors are eager to forget this year without being certain of seeing quite the end in 2023.
Traders work on the floor of the New York Stock Exchange (NYSE) in New York, United States, December 7, 2022.
REUTERS
The year 2022 on Wall Street, which ends on Friday, will be remembered as a “terrible” stock market vintage. 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 AFP Sam Stovall, strategist Chief at CFRA. “It’s a terrible year,” added this specialist in historical stock market statistics.
Less bad than in 2008
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 4:05 p.m. GMT. 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.
Vertiginous fall of Tesla and Meta
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 tech 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 by 19.2%.
The sector’s emblematic shares drank the cup, such as Tesla, down 65% over one year, but also Apple (-24% as of 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 dollars in March, bitcoin fell below 20,000 dollars three months later and is now trading around 16,000 dollars.
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 down 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. But it is at 21 these days, also underlines the expert. In addition, each time an inflation of more than 6% sets in, “it is accompanied by a recession with a bear market”, he predicts. He therefore believes that stock market indices “will again 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.
(AFP)