U.S. stocks fell on the final trading day of 2022, capping the worst year for global equity and bond markets in more than a decade. The S&P 500 fell for a third straight day and is down 20% for 2022 as a whole, even after a surge in buying at lower prices in the final hour. The Nasdaq 100 also closed lower, with the index down a third for the year as technology stocks became one of the most vulnerable sectors in the face of rate hikes.
The decline in U.S. stocks in the final week dashed investor expectations that 2022 would end on a positive note. In 2022, U.S. inflation raged and global stock market capitalization evaporated by one-fifth, making it the worst year since the financial crisis. As central banks raced to curb rising consumer prices by raising interest rates, bonds fell 16 percent in 2022, the biggest drop in at least 1990.
“We’ve never seen a market environment like this, where stocks and bonds are down together,” said Art Hogan, chief market strategist at B. Riley Wealth. “The good news is that this year will soon be history. The bad news is that 2023 will probably also be a volatile year, at least for the first few months. With the Fed’s inflation-fighting backdrop, 2023 is highly likely to shape up as a weaker economy, and the inevitable recession could help propel U.S. stocks to a better performance in the second half of the year.”
After iterations of record highs for the S&P 500 in 2021, few foresaw the ensuing declines so harsh. But after rising to a new all-time high on Jan. 3, the market’s good fortune quickly reversed as the Federal Reserve hinted at its determination to curb inflation. The Fed has since launched the most aggressive process of rate hikes in decades, causing both stocks and bonds to plummet.
