The first half of 2022 has been the worst period for stock markets in more than 50 years. Fears over rising interest rates and the potential recessions they will bring, have seen many investment assets suffer so far this year.
US stocks slumped into bear market territory recently as the Federal Reserve hiked interest rates to try and bring down soaring inflation. US rates are currently set for a range of 1.5% - 1.75%, and will almost certainly be at 2% in the coming months given inflation is above 8%. High inflation and hiking rates will inevitably lead to reduced spending from consumers, and stocks are the resulting casualty.
The S&P 500 has fallen just over 20% so far in 2022, its worst performance since 1970. The Dow Jones is down 15%, while the Nasdaq has performed even worse, losing just over 30% so far, its biggest half-year loss ever.
Chart showing the performance of the NASDAQ 100 Index year-to-date. Source – Google.
Indexes around the world have also struggled however, as the global economy buckles under the perfect storm created by pandemic lockdowns and the trillions printed by central banks to combat it. The FTSE 250 is down over 20%, Europe’s STOXX 600 is down 17%, and Asia’s MSCI index is down 29%, all year-to-date.
Stock markets have been notorious in recent years for being overly positive, creating a bubble of easy money from quantitative easing. Given the dour outlook globally, it remains to be seen whether further losses are to come for stock markets.
Other assets and commodities have also got off to a bad start in 2022. Cryptos have suffered one of their worst selloffs in recent years. Since peaking in March, Bitcoin has halved in value, while Ethereum is down a shocking 70% so far in 2022. Industrial commodities like iron and copper have also fallen as Covid lockdowns in China and slowing growth elsewhere hit manufacturing.
For precious metals it has been a mixed bag. Gold in particular has held up well, and remains one of the best performing assets in 2022, particularly for UK investors. In GBP gold is up over 9% so far in 2022. In USD it is down 1.95% but remains ahead of other assets as mentioned above.
As an industrial metal, silver has fared worse, down 5% and 15% in GBP and USD respectively. Platinum and palladium have help up better however, up 2.6% and 11.7% respectively in GBP, likely due to reduced supply given the ongoing sanctions on Russia.
Safe haven demand however remains high for both gold and silver. With high inflation and a potential recession on the horizon for many countries, investors are increasingly looking to safer options given the losses in many other assets, and gold is proving to be a popular choice for many.
