When it comes to the New Years good intentions, Wall Street leaves them provisional untouched. Looking at the start of 2022, the S&P US 500 stock market gives little reasons to be positive. Starting at 4804,6 points, with the close of a turbulent year it appears to be closing at roughly a thousand points lower, or -20%. As the holidays are normally a season of being joyful, traders are scrambling to salvage their portfolios. Wall Street has had a rough start to the holiday season, with the Dow Jones Industrial Average falling more than 1,000 points in the past week. What is going on and where is this going to?
The US 500, a quick introduction
The US 500 is a stock market index that tracks the performance of 500 large-cap companies listed on the New York Stock Exchange. The index is widely considered to be a leading indicator of the US economy, and it is often used by investors as a gauge of market performance. The US 500 Index is a broad measure of the stock market and includes companies from a variety of industries. Some of the largest and most well-known companies in the world are members of the US 500, including Apple, Microsoft, Amazon, and Google parent Alphabet.
The year 2022 for the US 500 stock market
2022 has been a rollercoaster for the US stock market. The type with steep drops that won't delight anyone but the thrill seekers. After hitting record highs in January, it seemed like the market would just keep heading up forever. But then, on March 12th, after a few declines everything changed as the S&P 500 suffered its steepest one-day decline since 1987. Investors where awaiting the situation in Ukraine which has been escalating ever since. Rising inflation numbers , also caused the stock prices to go wild with no indication of stopping anytime soon.
At the current moment, roughly all the stocks included in the US 500 dropped. Also major stocks like Tesla (-46%),Generac (-70%) and Meta (-67%) all lost value. Why is the situation of the US 500 causing so much anxiety among investors? A combination of factors led to investors selling their stocks and the market to crash, like a strong dollar, weak economic data, and concerns about corporate earnings. But what to expect?
Short term predictions
The US 500 market has yet to recover from its downfall and many experts believe it could take years for it to reach its pre-crash levels. Some experts expect it to go even back to its record low of 3500 points last October. This is bad news for investors who are still holding onto their stocks, as they are unlikely to see any significant returns in the near future.
While the short-term outlook is uncertain, some analysts are predicting that the market could rebound in the new year. *"We think this is a pause that refreshes," *said Michael Farr of Farr, Miller & Washington. "We would use any weakness as an opportunity to increase equity exposure."
Others are not so optimistic. "I think this is the beginning of a long, drawn-out bear market," said Peter Schiff of Euro Pacific Capital. "The problems in Europe are far from over, and I think we're going to see more problems in Asia."
As being a professional day trader, for DHF Capital S.A. it is hard to predict the future returns from index funds. “Given all of this, it's hard to make any concrete predictions about what will happen in the near future,” says Bas Kooijman, CEO at DHF Capital S.A.* “The market has lost 20% of value this year. That trend can continue, but it can also suddenly turn to the positive again. There is no way to correctly predict this.”*
Scenarios on the long run
While not able to see the future, are there scenarios to expect? Yes. There are a number of factors at play here to come with careful conclusion. First and foremost is the continued uncertainty surrounding the fate of the global economy. While the US has been relatively insulated from the worst of the economic troubles plaguing Europe and Asia, there are signs that things may be starting to catch up.
In particular, there are concerns about slowing growth in China and other emerging markets. These economies have been key drivers of global growth in recent years, but there are now fears that they may be cooling off faster than expected. This could have serious implications for US companies that do business in these countries.
In addition, there are worries about the Fed's decision to raise interest rates, as other banks have done as well. This could lead to higher borrowing costs for businesses and consumers alike, which could put a damper on economic activity and any further inflation.
Investing with DHF Capital, always a strong choice
Bas Kooijman: *“Investing passively is outdated. Active investing is how you can get the best results. That means that there are basically two options. Or you become a professional day trader to understand the way the US 500 behaves and to anticipate. That takes some years of practice and lots of dedication. The second option is to let a professional handle your assets with care. That means you get managed better.” *
In the world of investing there are summers and winters. Investing with DHF Capital S.A. means that you have a guaranteed return, whatever the season. We are on top of the US 500 and the European stocks as well to bring you the latest insights. Get in touch with us to find out what investing can mean for your assets. Together we take a deep dive in the possibilities.