S&P 500 ends brutal first half of ’22 with biggest loss rate since 1970

A trader works on the floor of the New York Stock Exchange (NYSE) in New York City, US, June 27, 2022. REUTERS/Brendan McDermid

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NEW YORK, June 30 (Reuters) – Strong losses in stocks and bonds, staggering market swings and a Federal Reserve looking to curb the worst inflation in more than 40 years were among the hallmarks of US markets in the first half of 2022.

The S&P 500 (.SPX) ended the first six months of 2022 with a 20.6% loss, losing some $8.5 trillion in market value as the index registered its strongest first-half drop since 1970.

The index confirmed the general definition of a bear market earlier this month by closing more than 20% from its record high in January. read more

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Bonds fared slightly better, with the ICE BofA Treasury Index (.MERG0Q0) falling about 10% this year, on pace for the worst year in the index’s history, dating back to 1997.

For now, investors see little respite from the swings that have plagued markets in recent months, amid concerns that the Fed’s fight against inflation will further dry up risk appetite and potentially plunge the US economy into recession.

The coming month will bring another round of corporate earnings and the latest inflation data and culminate in a Fed meeting, giving markets plenty of opportunity to build on an emerging rally in equities that started in mid-June or look for new ones. lows.

Rising inflation forced the Fed to raise interest rates quickly in the first half of the year, reversing accommodative monetary policy that more than doubled the S&P 500 from its March 2020 lows. read more

The index’s decline has wiped out many of the high-growth stocks that have thrived in recent years. One notable casualty is Cathie Wood’s ARK Innovation ETF (ARKK.P), which has post-pandemic favorites such as Zoom Video Communications (ZM.O), Teladoc Health Inc (TDOC.N), and Roku Inc (ROKU.O), so far. decreased by about 58%. read more

The decline in stocks has also put a strain on the popular strategy of buying stocks for weakness, which has rewarded investors for most of the past decade, but failed this year amid the S&P decline. The benchmark index has seen three rebounds of at least 6% this year that have reversed and dropped below its previous low. In its latest rebound, the index is up about 3% since its mid-June low. read more

Another popular approach that has suffered this year is the so-called 60/40 portfolio, where investors rely on a mix of stocks and bonds to protect against market declines, with stocks rising amid economic optimism and bonds emerging in turbulent times. getting stronger. read more

That strategy backfired in 2022 when expectations from an aggressive Fed weighed on both asset classes. The BlackRock 60/40 Target Allocation fund is down about 16% since the beginning of the year, its worst performance since its launch in 2006.

In the first half of the year, volatility returned spectacularly in global financial markets, with stocks, bonds and currencies all rocked by central bank movements and mounting geopolitical tensions.

But while the Cboe Volatility Index (.VIX), or “Wall Street anxiety meter,” has remained high all year so far, it has failed to close above 37, the average level that marked previous market bottoms. . That has led some investors to worry that the sale might not happen. read more

Few believe that the wild swings in the markets will subside until there is evidence that inflation is cooling, allowing the Fed to slow or halt monetary policy tightening. For now, warnings of an impending recession on Wall Street have grown louder as the effects of higher interest rates seep into the economy. read more

The Citigroup US Economic Surprise Index, which tracks where a core set of economic data series has entered relative to expectations, shows incoming data missing estimates by the widest margin in about two years.

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Reporting by Saqib Iqbal Ahmed; Writing and additional reporting by Ira Iosebashvili Editing by Nick Zieminski and Diane Craft

Our Standards: The Thomson Reuters Trust Principles.

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