Martha & the Vandellas in their 1965 hit song perfectly described how investors felt when the first half of 2022 was over. There was “Nowhere to run, nowhere to hide.”
Of the 40 investment categories reported by the Wall Street Journal*, 29 had losses ranging from (59.6%) for Bitcoin to (0.3%) for Sugar, and only 11 had gains ranging from +3.3% for coffee to +63.8% for gasoline. Broad stock indices were down from (29.5%) to (15.3%), and even broad bond indices felt the pain of rising interest rates and escalating inflation with losses ranging from (17%) to (3.2%).
* “It Can Always Get Worse” July 2-3, 2022 returns year-to-date as of 6/30/22.
So, statistically, you might ask, “What can come next after such a first half sell-off?”*
– As measured by S&P500, this was the largest first half sell-off in more than 50 years.
– In the two years in which S&P500 exceeded this year’s sell-off, the index rebounded in the second half, rising +15% in 1962 and +27% in 1970.
– In 4 of 7 years with declines of 10% or more since 1960, losses worsened in the second half.
* “The Selloff, and What Comes After” Wall Street Journal, July 2-3, 2022
And what can we do while we wait for recovery?
– Tax trades in 2022 — selling stock and bond fund positions to realize losses for tax purposes and reinvesting proceeds into similar funds and holding for at least 30 days.
– Rebalancing back down to equity goal prior to downturn — In 2021, while equity markets were still up, many accounts were rebalanced to realize gains prior to the downturn.
– Count your wealth in more ways than dollars and cents — hug your loved ones. Connect with friends. Pat yourself on the back. Enjoy your vacation and leave the worry to us.