US stocks record worst half-year performance since 1970
Selling pressure deepened on US stocks today, after weak consumer spending data fueled recession fears, with the Standard & Poor's 500 index posting its worst semi-annual performance since President Richard Nixon.
This shocking performance will be recorded in the history books, as the benchmark fell by 21% in the first six months of the year - the largest decline during that period since 1970.
The Nasdaq 100 index has fallen by nearly a third this year, after falling 1.3% on Thursday, wiping out about $5.4 trillion from its market value, amid a massive sell-off that hit all stocks, leaving few stocks unscathed. The index, which is stacked with technology shares, ended the current month's transactions down by 9%, losing more than 20% of its balance during the second quarter, on its way to recording the largest annual decline ever.
Back-to-back sell-offs this year have slashed some of the biggest tech companies. The Nasdaq 100 index now includes 21 companies with a market capitalization of $100 billion or more, down from 33 at the end of last year.
The 10-year Treasury yield has fallen to around 3% from a decade high of 3.5% in mid-June. While the dollar recorded its best quarter since 2016. On the other hand, "Bitcoin" recorded the worst quarterly performance since the third quarter of 2011, after falling almost 60% since the end of March.
Recession fears
The poor performance of US stocks during the first half of the year is due to the escalation of fears among dealers that the US economy will enter a phase of recession against the background of the Federal Reserve tightening its monetary policy, raising interest rates to curb rising inflation, as well as the crises that hit supply chains over the course of the year. The past six months, in addition to the negative repercussions of the Russian war in Ukraine.
“The stagflation that is sweeping our country right now will make things difficult for the stock market in the medium term,” said Matt Malley, chief market strategist at Miller Tabak. “When demand is not the main reason inflation is a problem, a slower economy will not help reduce Inflation is as far as some experts believe.
“The problem is we haven't really seen inflation like this in decades,” said Michael Neal, senior investment analyst and portfolio manager at UBS Asset Management. “Since 2009 or so, we've had very low rates that have contributed to our years of strength. However, those low rates won't last forever."
Over the past few months, the decade-long strategy has been met with new market bottoms. Traders avoided the “buy on low” mantra while adopting the “sell on the high” position. As a result, the S&P 500 entered a bear market for the second time since 2020, having fallen more than 20% from its January peak.
Many of the stocks that were among the biggest winners in the pandemic years turned out to be the worst performers in 2022, including giant Netflix, Teledoc, Zoom and Dokyo Sign.