RE: Ups and Downs2 Jul 2022 09:32
Here's hoping for an early Christmas present
https://www.telegraph.co.uk/business/2022/07/01/still-money-made-stock-market-why/
There's still money to be made in the stock market – here’s why
From here on, the rest of 2022 is more likely to get better than worse
Interest rates are still rising. A sharp recession is looming. Supply chains are still chaotic, the war in Ukraine is dragging on and on, and inflation shows no sign of coming under control. It is hardly surprising that stocks are getting hammered.
With the sole exception of the FTSE, which has done so badly over the last 20 years it could hardly do any worse, the first half of the 2022 has been one of the most brutal for investors on record – and in the case of the Nasdaq, actually the worst half year ever.
From here on, things can only get better. In fact the historical record shows that terrible first halves to the year are typically followed by a strong bounce back in the six months that follow. If inflation starts to ease, if employment stays robust even as real wages fall, and if the war comes to a quicker than expected end, that should be the story of 2022 as well. It is unlikely to be a great year but a lot of the losses of the last six months could be quickly recouped.
The stock markets closed out the first half of the year on Thursday with another day of very heavy losses. The S&P 500, still the key global benchmark, has lost 20pc since the start of January, its worst first half performance since way back in 1970. The tech heavy Nasdaq has suffered its biggest six month crash on record with $5.4 trillion (£4.5 trillion) wiped off the value of stocks, with high flyers such as Netflix and Meta crashing hard.
There is no real mystery about why the markets are so weak. Two years where we mostly stayed at home while every major government in the world printed billions in extra money to pay for everything have created inflation on a scale we have not seen for a generation or more. The only tool central banks have to bring that back under control is to raise interest rates, and, if necessary, push the economy into a recession. Against that backdrop, equities are a lot less valuable than they were last year. Investors have started selling in droves and will carry on doing so for some time yet.
Here's the positive news, however. A terrible start to the year is generally followed by a far stronger second half. According to LPL Research, the S&P 500 has been down by 15pc or more in the first half of the year on six occasions since 1930 (the worst, in case you were wondering, was the 45pc drop in the first half of 1932).
On each of those six occasions, the second half of the year showed a strong bounce back, with an average gain of 22pc (again 1932, a heck of a rollercoaster of a year by anyone's standards, was the best, with a 56pc recovery).
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