A Look At the Market – July 2022

This post looks at the state of the market in July, 2022. There have been a lot of significant changes in the last 12 or so months:

• Rising interest rates – after the largest bull market in history in bonds (when interest rates fell to negative territory, an unheard of historical level), we now have rising interest rates. These rising rates are meant to quell inflation, but they have many other impacts, including a huge impact to the housing market (30 year loans cost much more) and stocks that are selling on future profits (such as SAAS stocks currently losing money but promising to make it in the future)
• Strong US dollar – a stronger US dollar makes foreign stocks worth less, all else equal, because their value is translated into US dollars for us. The US dollar is now at parity with the Euro, something that hasn’t happened in decades
• China damages its own market, Russia zeroes out its market – China has taken many steps to reign in their tech stocks and bow them down to the state, which has taken hundreds of billions of value from their markets. Russia effectively ceased to exist as a market; companies that used to be worth billions are now worth almost nothing
• Fossil fuels and oil / natural gas stage a huge rebound – until recently fossil fuels and oil / natural gas were seen as relics of the past and a focus of dis-investment. With the war in Ukraine, oil prices have skyrocketed and this is having a huge impact on European and US economies. Since the US is a major producer of oil and gas, we have some offsetting gains, but in Europe it is mainly a significant burden
• SPAC’s fall significantly and the IPO market freezes – SPAC’s offer a less regulated approach to the public markets; almost all the SPAC stocks are trading for less than their issuance prices, often far less. The IPO market is effectively frozen, which generally occurs when markets fall

Let’s look at how this has impacted the S&P 500 first. Using this chart (note – I am reviewing this as of 7/24/22 – if you look at it on other dates, you will see different results since it is updated with the market daily). Note that this doesn’t include the impact of dividends, which is significant on longer multi year time frames.

Top 100 stocks – only the top 100 stocks (out of 500) have gains for the YTD as of late July. Big winners are the oil companies such as Exxon Mobil (XOM) up 42% YTD, and some companies catering to low income consumer staples like Dollar Tree (DLTR) up 22% YTD or Kraft Heinz (KHC) up 7%. Activision Blizzard (ATVI) is up 19%, since it is being purchased by Microsoft (MSFT). Utilities and cigarettes also fall into the small positive percentage category

Stocks 101 – 200 – these stocks are all down YTD, between zero and -10%. You see a lot of less risky stocks here, like Allstate (ALL) – 1% YTD and Berkshire Hathaway (BRK.B) – 4% YTD, and Walmart (WMT) – 9% YTD. One surprise is Twitter (TWTR) down only 8%, due to Elon Musk’s bid which moved the stock up significantly.

Stocks 201 – 300 – these stocks are all down between -10% to -20% YTD. Here you see CME Group (CME) down 10%, Medtronic (MDT) down -12%, Apple (AAPL) down 13%, many of the banks like Goldman Sachs (GS) and Northern Trust (NTRS) and others. This is where the best performing tech stocks ended up (like Apple) and most of the financials.

Stocks 301 – 400 – these stocks are all down 20% – 28%. This is where the “better” performing tech stocks ended up, like Amazon (AMZN) down -27%, Alphabet (GOOG) down 25%, some of the worst performing banks like Bank of America (BAC) down 25%, TESLA (TSLA) down 22%, and a lot of the health care like Baxter (BAX) down 23%.

Stocks 401 – 500 – these stocks are down 27% to 63%. They include some former high flyers like Netflix (NTFX) down 63%, Paypal (PYPL) down 57%, Facebook (META) down 50%, Nvidia (NVDA) down 41%, Moderna (MRNA) down 35%, Nike (down 35%), ServiceNow (NOW) down 31%, Accenture (ACN) down 30%, Dominos (DPZ) down 29%, and some of the worst performing banks like JP Morgan (JPM) down 27%.

Top Foreign Stocks – let’s look at some of the widely held foreign stocks for YTD 2022 performance as of late July. Note that not only are these stocks driven down by many of the same factors (above) that impacted US stocks, they are further impacted by the rising dollar which also makes their value lower when translated back into US dollars (for our purposes). Broadly speaking, the non-US stocks traded similar to US stocks, with the better performing tech stocks down 33% for instance for TSM and SAP, 5o% for Alibaba (BABA) and 75% for Shopify (SHOP). Their oil companies held up well and industrials generally down but not as badly impacted.

• Taiwan Semiconductor Manufacturing (TSM) down 33%
• Shell (RYDAF) up 10%
• Astra Zeneca (AZN) up 17%
• Toyota Motor (TM) down 14%
• Novartis (NVS) down 6%
• Alibaba (BABA) down 50%
• L’Oreal (LRLCY) down 22%
• BHP Billiton (BHP) down 27%
• Royal Bank of Canada (RY) down 5%
• Shopify (SHOP) down 75%
• HSBC Holdings (HSBC) up 10%
• Unilever (UL) down 14%
• LVMH (LVMUY) down 22%
• SAP (SAP) down 33%
• Allianz (ALIZY) down 26%
• Siemens (SIEGY) down 39%
• JD.com (JD) down 10%
• Canadian National Railway (CNI) down 6%
• Airbus (EADSF) down 19%
• UBS Group (UBS) down 11%
• Vodaphone (VOD) flat