Under the double attack of persistent inflation and the Federal Reserve accelerating tightening of monetary policy, the Dow Jones Industrial Average fell 15.3% in the first half of this year, the worst first half performance since 1962.
During the same period, the S&P 500 index fell by 20.6%, the largest first-half decline since 1970. The stock index fell 21.1% from its new closing high set on January 3.
The Nasdaq, which focuses on technology stocks , suffered the most severe decline, falling 29.5% in the first half of the year, the largest decline on record. Currently, the Nasdaq index has fallen by more than 31% from the historical high reached on November 22 last year. The last time the Nasdaq fell more than 20% in the first half of the year was back in 2002, and the stock index eventually fell 8.7% in the second half of that year.
Technology giants are not immune. Since the beginning of the year, Netflix has fallen 71%, Facebook parent company Meta has fallen 52%, Google parent company Alphabet has fallen 24.8%, Apple has fallen about 23%.
US stocks The second half of the year " After all the hardships come the joy " ?
After the most miserable first half of the year in more than half a century, will the US stock market be able to overcome all the hardships in the second half?
Barry Bannister, managing director and chief equity strategist of Stifel, told a reporter from First Financial : " inflation has peaked, and now there is a gap in the S&P 500 index Due to excessive pessimism about the economic outlook, cyclical growth stocks, led by technology stocks, are expected to boost the S&P 500 index by about 10% this summer, climbing to 4150 points. "
Historical data also shows a huge decline at the beginning of the year. It is often followed by a sharp rebound thereafter.
LPL Research, an independent broker-dealer, has calculated the performance of the S&P 500 Index in the first half of the year since 1928. The data shows that during the period, the stock index fell by more than 15% at the end of the first half of the year five times. In the following six months, the S&P 500 Index fell by more than 15%. A rebound was achieved, with an average increase of 23.7%.
Quincy Krosby, chief equity strategist at LPL Financial, asked himself: "Is the market expected to recover in the second half of the year? There are many challenges and uncertainties ahead, but (examples of rebounds) have indeed happened before."
1970 In the first half of the year, the S&P 500 index fell by 21% and rose by 26.5% in the second half.
Inflation is hard to eliminate, and the volatility of US stocks is hard to calm down.
More and more investors suspect that this time, US stocks may not be able to get the blessing of history.
With the supply chain disruption caused by the Russia-Ukraine conflict and the epidemic, energy and food prices have soared, U.S. inflation has fluctuated at a "high level" in 40 years, and the Federal Reserve has accelerated interest rate hikes, causing global market shocks...
In addition to U.S. stocks, the Pan-European Stoxx 600 The index fell by a cumulative 16.6% in the first half of the year. Emerging markets suffered a double blow from stocks and bonds. Bitcoin plummeted by about 58% year to date. Copper prices, which are usually considered to be economic indicators, fell by more than 15%.
Oil prices became one of the few assets that closed higher in the first half of the year. In the first half of the year, U.S. benchmark West Texas Intermediate crude oil rose nearly 41%, while benchmark Brent crude oil rose nearly 48% during the same period. The source of the fluctuations in
points to inflation and the Federal Reserve's misjudgment of inflation.
Allianz economic adviser Mohamed El-Erian said in a recent interview with foreign media: "Powell needs to take back control of inflation... Now he is losing complete control."
On Thursday (30th) local time, data released by the U.S. Department of Commerce’s Bureau of Economic Analysis (BEA) showed that the U.S. personal consumption expenditures (PCE) price index rose 6.3% year-on-year in May, still hovering near a nearly 40-year high. Among them, energy prices increased by 35.8% year-on-year, and food prices increased by 11.0% year-on-year.
After excluding volatile food and energy prices, the core PCE price index rose 4.7% year-on-year that month.
"High and volatile" inflation means that the Federal Reserve continues to increase interest rates and there is a greater probability of an economic "hard landing."
Currently, the Chicago Mercantile Exchange's FedWatch Tool shows that traders expect the probability that the Federal Reserve will announce a 75 basis point interest rate hike after the monetary policy meeting on July 27 is 83.2%. The probability of raising interest rates by at least 175 basis points before the end of the year is expected to reach 83.2%.
On Wednesday (29th) local time, Federal Reserve Chairman Powell once again "blushed" the market when attending the European Central Bank's annual monetary policy forum, saying that there is "no guarantee" that a soft landing for the economy will be achieved. Powell emphasized that excessive inflation is the biggest risk facing the U.S. economy.
The second half of "hard landing"?
In view of the inevitable economic slowdown, Citi analysts recently lowered their year-end target for the S&P 500 Index to 4,200 points from the previous 4,700 points. The bank predicts that the possibility of a "mild recession" in the U.S. economy is 40%, in which case the S&P 500 index may fall back to 3,650 points.
As of the 30th, the S&P 500 index closed at 3785 points.
Bannister said that his view on the long-term bear market of U.S. stocks (secular bear market) has not changed, and the potential rebound may only be a short-term recovery in the bear market.
Doctor Doom Roubini (Nouriel Roubini) warned investors that expectations for a mild recession are "dangerously naive" and said that the coming recession could trigger a 50% plunge in U.S. stocks.
"Today, facing supply chain shocks with higher debt levels means that we are heading towards a combination of the stagflation of the 1970s and the debt crisis of 2008 - a stagflationary debt crisis." Roubini explained .
