The 2022 bear market began days after the year started. Every rally gave way to steady selling. Buyers responded to new yearly lows by bidding the S&P 500 (SPY) higher. Volatility (VXX) is absent.
The weak stock markets unilaterally beat up almost every sector except for energy. Still, many drug manufacturers like Merck (MRK), AbbVie (ABBV), and Bristol-Myers Squibb (BMY) traded at higher prices this year.
In the tech sector, stocks that lost 85% to 95% are unlikely to recover in this bear market. Fortunately, Nasdaq fell by 29%, less than the small-cap stocks, on strength of Apple (AAPL). In contrast, Tesla (TSLA) and Amazon (AMZN) lost nearly half their value. Netflix is down 47% YTD, albeit up by 97% from its 52-week low.
High Interest Rates and Inflation
The bear market will intensify so long as inflationary pressures continue. The central banks have quantitative tightening and interest rate hikes as tools to slow demand. It will create a severe recession by mid to late 2023.
Stock markets are forward-pricing mechanisms. It risks falling further to adjust for the economic slowdown ahead.
Cautious investors should not only wait for the pace of the rate hike to slow. Instead, investors should wait for the Fed to stop raising rates. Only then will the bear market end.
