Stocks, corporate debt, sovereign bonds, cryptocurrencies—there was no safety for investors in the first half of 2022.
Nearly every asset class finished deep in the red as a perfect storm of runaway inflation, slowing global growth, war, an energy crisis, a food crisis, supply-chain snags, and central bank tightening slammed the markets.
It’s “a bit of a horror story,” concluded Jim Reid, part of Deutsche Bank’s thematic research team, commenting in a note to clients this morning. “For what it’s worth, the S&P 500 has now seen its worst H1 total return performance in 60 years. And also in total return terms, it’s fallen for two consecutive quarters for the first time since the [global financial crisis]. Meanwhile, 10-year Treasuries look set…to have recorded their worst H1 since 1788, just before George Washington became President.”
What does worst performance in 60 years actually look like? Let’s go straight to the numbers.
If you are long safe-haven dollar and crude, your portfolio is outperforming the pack. The U.S. benchmark West Texas Intermediate (WTI) is up 39% on the year, and the greenback is far outperforming the world's currencies so far. Congratulations.
But if you're heavily invested in Bitcoin, tech stocks, blue-chips, Asian shares, you name it—it's been a first half to forget.
Drilling down into stock sectors, just one of the 11 S&P 500 sectors is in positive territory for 2022.
Few groups were harder hit than crypto bulls. Bitcoin fell nearly 60% in the first half. That was hardly the worst performance for virtual coins over the first six months of 2022.
It was an ugly first half for bond holders too, with the closely watched 10-year Treasury now down 9.4% on the year. According to Bloomberg, this is the first time in 48 years that both stocks and bonds fell in the same period, dealing another blow to the tried-and-true 60/40 stocks-to-bonds 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, you would have had to get in a time machine and travel back to George Washington's America, to 1788, to glimpse a worse first half for holders of the country's sovereign bonds. Charlie Bilello, founder of Compound Capital Advisors, has an even more grim assessment. He runs the numbers, and sees the bond market on track to have its worst year ever.
- The S&P's first-half performance is the sixth worst in history. It did even worse—far worse (-37%)—in 2008, the height of the global financial crisis, Bilello calculates.
- What was the worst-performing S&P stock of the first half? That 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 make the top five? They're all in the oil and gas sector, with Occidental Petroleum leading the way, up 104.7% this year.
History shows that bear markets last, on average, about 16 months. That would would suggest investors are stuck in the first half of an uncertain stretch, particularly as the odds on a recession continue to climb.
Michael Burry of The Big Short fame figures we are about halfway through this bear market.
At 5 a.m. ET, S&P futures were trading 0.3% lower, as all three major indexes were in the red. The dollar too was higher. Over in Europe, stocks were flat, but off earlier lows.
Check out this Fortune must-read: “Profit warnings, recession fears, and layoffs—despite the carnage, Wall Street analysts still advise investors to buy, buy, buy stocks”