All three major stock indices ended the year having contracted significantly, as markets closed Friday for the last time in 2022 to post historic losses.
The Dow Jones Industrial Average closed down 8.8% on the year, while the S&P 500 and tech-focused Nasdaq Composite Fell by 19.4% and 33.2% respectively. Declines in December continued the historically bad 12-month run ending in November, one of the worst 12 months for U.S. stocks and bonds, according to the Financial Times (FT).
In 2008, the Dow closed the year down roughly 30%, while the S&P 500 and Nasdaq Composite declined roughly 40%, according to data from Yahoo Finance. However, in 2008, the bond market remained comparatively safe, while it has plunged alongside stocks in 2022, a rare occurrence that has made this year particularly dangerous for investors, according to MarketWatch.
In general, energy companies — such as Occidental, an American hydrocarbon company that was up roughly 120% year-to-date as of Friday — tended to beat the market, while Big Tech and communications firms, like Meta and Tesla, underperformed compared to the market and tumbled from their top-ranking valuations to lose nearly $4 trillion in market value this year, CNN reported.
Worldwide, equities lost roughly $14 trillion as central banks across the world hiked interest rates to combat inflation, and were on track to post their second worst year ever, Reuters reported Dec. 22. Some investors expect markets to continue to struggle until central banks are willing to cut interest rates once inflation is under control, the FT reported.
Traders work on the floor of the New York Stock Exchange (NYSE) on June 10, 2022 in New York City. Stocks fell over 800 points on Friday as inflation fears continue to spook investors. (Photo by Spencer Platt/Getty Images)
Investors have turned to less-risky stocks in the consumer staple, utility and healthcare markets, with companies like Consolidated Edison and Campbell Soup each posting double-digit growth in 2022, The Wall Street Journal reported. As a class, utility stocks on the S&P 500 declined just 1.2% this year, while consumer staples and healthcare declined roughly 3% and 4% respectively, massively over-performing compared to the rest of the market.
The margin between consumer staples and the rest of the market is the greatest since 2008, while healthcare and utilities beat the market by the largest margin since 2000, the WSJ reported. These companies were not doing anything “fundamentally exciting,” but they were a “good place to hide” this year, Thomas Martin, senior portfolio manager at advising firm Globalt Investments, told the WSJ.
The auto industry underperformed against the market, with Ferrari’s roughly 17% annual decline the smallest amongst major automakers this year. The FactSet Automotive Index, which measures the health of the auto parts and manufacturing industry, was down nearly 40% on the year, as the industry saw weakened demand amid high prices and interest rates, and electric vehicle startups struggled to take off.
Media companies, such as Disney, Warner Bros and Netflix, expect that the colossal declines of 2022 — each of the three giants lost more than 40% of their share value this year — will continue into 2023 as competition intensifies and consumers cut back on the number of services they subscribe to, CNBC reported. Two industry executives anonymously told CNBC that they expected Netflix to merge with another company, while another anticipated that Paramount Global might sell off various components of its business.
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