Global markets are set to close out their most bruising first half of a year in decades, leaving investors bracing for the prospect of further losses, writes The Wall Street Journal. Accelerating inflation and rising interest rates have fueled a months-long rout that left few markets unscathed.
The S&P 500 fell 20% through Wednesday, heading for its worst first half of a year since 1970, according to Dow Jones Market Data. "That’s the biggest risk right now—inflation and the Fed," said Katie Nixon, chief investment officer for Northern Trust Wealth Management.
Markets Head Toward Worst Start to a Year in Decades (The Wall Street Journal)
Excerpt from The Wall Street Journal: Stocks and bonds in emerging markets tumbled, hurt by slowing growth. And cryptocurrencies came crashing down, saddling individual investors and hedge funds alike with steep losses. About the only thing that rose in the first half was commodities prices. Oil prices surged above $100 a barrel, and U.S. gas prices hit records after the Russia-Ukraine war upended imports from Russia, the world’s third-largest oil producer. Investors seem to be in agreement about only one thing: More volatility is ahead. That is because central banks from the U.S. to India and New Zealand plan to keep raising interest rates to try to rein in inflation. The moves will likely slow down growth, potentially tipping economies into recession and generating further tumult across markets.
According to The New York Times, the economy is on the cusp of a recession, battered by high inflation and rising interest rates, which eats into paychecks, dents consumer confidence and leads to corporate cutbacks. As it has teetered, markets have tanked.
After Stock Market’s Worst Start in 50 Years, Some See More Pain Ahead (The New York Times)
Excerpt from The New York Times: The sell-off has been remarkably broad, with every sector except energy down this year. Bellwethers including Apple, Disney, JPMorgan Chase and Target have all fallen more than the overall market. And that’s only part of the horror story for investors and companies this year. Bonds, which are seen as providing lower but more stable returns for investors, have had a terrible six months, too. Because bonds are particularly sensitive to economic conditions, reflecting shifts in inflation and interest rates more directly than stocks, this is perhaps an even more worrying sign about the state of the economy.
A record-setting run fueled by cheap money has ended, and Wall Street is having a hard time adjusting to a new reality. With the Federal Reserve aggressively hiking interest rates to fight high inflation, the economic landscape has changed dramatically, reports NPR.
"When interest rates go up, it changes all the math," says Charles Bobrinskoy, vice chairman of Ariel Investments. "It changes the math of buying a car, buying a house, buying a bond, and it changes the value of particularly tech stocks, whose earnings are far off in the future."
It's been a vicious 6 months for stocks. Here's what the grim markets are signaling (NPR)
Excerpt from NPR: All that whipsawing on Wall Street of the last few months reflects real nervousness among investors. They're worried the Fed may tip the U.S. economy into a recession. Historically, when interest rates rise and borrowing costs go up, investors pull out money from the riskier parts of the economy. High growth companies and tech stocks are the first to see their stocks fall. This time is no different. The S&P 500's worst stock performer to date is Netflix, which is down 70%. It's an incredible reversal for a company that saw it share price skyrocket during the pandemic, when the streaming service became a lifeline for the locked down. The second-worst performer is Etsy, the online marketplace for art and craft from artisans, which is down almost 65%.
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