The third quarter is about to end – and investors are wishing the past nine months good riddance. Stocks fell Thursday, giving up much of Wednesday’s big gains. The Dow was down more than 450 points, or about 1.6%, in late morning trading.
The Dow is now back in bear market territory, more than 20% below the all-time high it set in January. The S&P 500, one of the broadest measures of the health of Corporate America, fell 2.2% Thursday and has plunged about 24% this year.
The tech-laden Nasdaq Composite sank more than 3% Thursday and has plummeted even more than the Dow and S&P in 2022. Major stock exchanges in the UK, Europe and Asia have all dropped sharply this year as well.
The stock market had a promising start to the quarter, soaring in July. But fears about inflation, rate hikes, rising bond yields and recession returned with a vengeance in August and September.
A drop in weekly jobless claims spooked investors Thursday. The job market remains relatively healthy, even as the broader economy has contracted. Traders are betting that the labor market strength will keep pressure on the Federal Reserve to continue raising interest rates aggressively for the rest of this year and in 2023.
But it’s not just stocks that have tumbled. It’s the bear market for just about everything. There have been few places for investors to run and hide this year. Bond yields have surged, which means that prices are down. That weighs on returns.
Bonds are supposed to be safe havens during times of market and economic volatility. But two popular, widely held bond funds, the Vanguard Total Bond Market Index Fund ETF
(BND) and iShares Core U.S. Aggregate Bond ETF
(AGG), are both down nearly 16% in 2022.
Think gold is a good place to ride out the storm? The price of the yellow metal is down 10% this year. And forget about cryptocurrencies. Bitcoin prices have fallen off a cliff, plummeting nearly 60% in 2022.
Still, there are some winners even in this brutal market environment. Oil prices are up for the year, partly due to supply concerns in Europe resulting from Russia’s invasion of Ukraine. Energy giant Chevron
(CVX) is the best performing stock in the Dow this year while Warren Buffett-backed Occidental Petroleum
(OXY) leads the S&P 500.
Healthcare stocks, typically a defensive sector that holds up better during tough economic times, have done well too. Pharma giant Merck
(MRK), biotech Amgen
(AMGN) and insurer UnitedHealth
(UNH) are all up this year and are the top stocks in the Dow after Chevron.