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What’s going on?
Plenty of tried-and-tested investor favorites lost their shine this year, making room for one gold-star sector to steal the limelight.
What does this mean?
Let’s make a deal: we’ll rip the bad news Band-Aid off first, then finish on a high. Stocks, for starters, were sucked dry by recession fears, valuation-denting rate hikes, and disappointing earnings: in fact, the S&P 500 – the biggest US index – tumbled 20% this year. Government bonds didn’t fare much better: investors were quick to ditch them when higher inflation and rates chipped away at bonds’ fixed payments, and central banks sold theirs to tamper down inflation. But one investment really took off: commodities went from strength to strength this year, as war in Europe thrashed supplies of energy and raw materials globally. That meant het-up demand outstripped supply and then some, tipping key commodity indexes into the green for the year. See, told you it wasn’t all bad.
Why should I care?
For markets: It’s not you, it’s the global economy.
Lucrative investing opportunities were few and far between this year: out of the whole S&P 500, only the runaway energy sector pulled off decent growth. Even your classic defensive go-tos like consumer staples and utilities – which folk tend to use no matter what – left investors barely breaking even. And the curse struck a few investor favorites too: Big Tech darlings Meta and Amazon’s stocks slipped 65% and 51% respectively this year, while OG EV-maker Tesla is languishing at its lowest in two years. So yeah, it wasn’t you.
The bigger picture: Crypt-ho-ho-ho.
Let’s be real, you were unlikely to take any gambles this year when you could settle for guaranteed returns from your savings accounts. Investors made the most of higher rates and stuck their cash into savings, and were quick to throw out their riskier investments first. Crypto – bet you saw that coming – was dropped like a hot potato, sending bitcoin and ether down 65% and 68% this year.
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Originally Posted December 28, 2022 – Starstruck
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