Either way, 2022 was a punishing year for both Wall Street and Main Street investors. Each of the three major US stock market indexes posted their worst performance since 2008. For those who remember, it was at the height of the global financial crisis of 2007-09.
For the full year of 2022, the benchmark S&P 500 index fell by 19.4%. It was the seventh-worst annual performance for the S&P 500 dating back to 1929. The tech-heavy NASDAQ fell 33.1%, its fourth-worst performance of all time. The Dow Jones Industrial Average, which tracks just 30 stocks, was the best performer, losing just 8.8%. 2022 marked the end of a three-year rally in the US stock market.
The bond market, often seen as a safer, less volatile alternative to the stock market, also suffered significant losses. The Bloomberg U.S. Aggregate Index, a broad benchmark of the U.S. bond market, fell 13.1% last year. It was the worst performance for the index since 1976. In 2022, 78% of all investor bond funds created through 2021 posted their worst annual performance ever, according to Morningstar. Even gold, another investment often used as a safe haven against market shocks, lost 1.8% last year.
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It’s clear that investors want to put 2022 well into the rearview mirror and hope for better prospects in 2023. But, for now, investors are being cautious with their optimism. According to a recent survey by the American Association of Individual Investors, only 24% of individual investors expect stock prices to rise in the next six months. This is significantly below the 40-year average of 37.5%. Furthermore, 39.9% of respondents had a negative forecast that stock prices will decline in the next six months. Thirty-six percent expressed a neutral view that stock prices would remain relatively unchanged.
Investors are slightly more optimistic about the long-term outlook for the stock market. In a recent survey conducted by OnePoll for Forbes Advisor, 54% of American investors believe that the stock market will be higher in 12 months. But make no mistake, whether short-term or long-term, investors are fully aware that there are a number of obstacles in the way of a bullish stock market. High inflation, rising interest rates, an economic downturn expected this year and an expected weakening labor market are sobering reminders of the challenges ahead for investors.
Mark Grivacheski is an expert in financial markets and economic analysis and is an investment advisor at Quad-Cities Investment Group, Davenport.
Disclaimer: opinions expressed herein are subject to change without notice. Any prices or quotations contained herein are indicative only and do not constitute an offer to buy or sell securities at any price. The information has been obtained from sources believed to be reliable, but we do not warrant that the material presented is accurate or that it provides a complete description of the securities, markets or developments indicated. Quad-Cities Investment Group LLC is a registered investment adviser with the US Securities and Exchange Commission.