2022 marked a year of drastic change in global markets. Previous winners became losers, and losers morphed into some of the year’s biggest winners. The conflict in Russia intensified inflation and furthered an already fragile supply chain causing rocketing commodity prices. After years of dovish Federal Reserve policy, inflation finally reared its ugly head – soaring to near double-digit heights domestically and in many areas worldwide.
The year was a distinct change of pace from the recent Covid-19 pandemic recovery. While it was difficult for some investors and rewarding to others, looking back, and learning from the past is a worthwhile endeavor. Though history may not repeat itself exactly, it tends to rhyme. Below are some of the biggest winners and losers of 2022:
Winners:
Value Stocks:
In 2022, the Fed removed the proverbial “punch bowl” by raising rates at an unprecedented pace. As the economy slowed and the post-pandemic euphoria subsided, investors exited growth stocks and other “risk-on” areas and gravitated toward value. As of this writing, the Dow is down on the year; however, it is the top performing indices in the U.S. While the Nasdaq and the S&P 500 threaten recent lows, the Dow is above its 200-day moving average.
Image Source: Zacks Investment Research
Pictured: Dow performance versus the Nasdaq.
Consistency, profitability, and peace of mind were what investors were focused in on among an uncertain and frightening back-drop. Stocks like
Coca-Cola
KO
were an oasis for investors looking for steady returns and a healthy dividend.
Energy:
Early in 2022, energy prices were trending higher as global economies recovered from the pandemic and demand rose drastically. Next, OPEC+ announced its largest oil production cut in history, stifling supply as demand grew. As the “perfect storm” began to form the final domino to fall over was the Russian invasion of Ukraine. Global superpowers such as the United States began to sanction Russia, cutting off one of the world’s largest oil suppliers. Natural Gas, Coal, and Solar Energy companies went on tremendous runs before pulling back in the past few months. The
Energy Select Sector ETF
XLE
is up 56% this year, while the S&P 500 Index is down 13% year-to-date.
Despite the massive gains earlier in the year, oil is again showing relative strength of late, as oil-related stocks like
Haliburton
HAL
and
Schlumberger
SLB
breakout amidst general market weakness.
Defense:
Since the beginning of the war in Ukraine, the U.S. has sent more than $50 billion in military aid to the Ukrainian government – with more on the way. Defense stocks such as
Lockheed Martin
LMT
and
Northrup Grumman
NOC
have benefitted the most and have registered healthy gains for investors in a tough market.
Image Source: Zacks Investment Research
Pictured: Defense names LMT and NOC have outperformed the S&P 500 amidst the war in Ukraine.
With Russian President Putin and Ukrainian President Zelensky showing no signs of wanting to compromise or motivation to end the conflict, investors should be watching the space for 2023. Furthermore, both sides of the aisle in Washington seem firmly committed to spending more money to support Ukraine.
Warren Buffett:
The “Oracle of Ohama” had a signature year. While markets were volatile, and stocks with high valuations got crushed, Buffett outperformed. Rather than chasing the next shiny object, Buffett stuck his bread-and-butter strategy of investing in strong, reliable companies at reasonable valuations. Though Buffett’s largest position,
Apple
AAPL
,
fell in tandem with most tech-related stocks, he succeeded by taking a massive position in oil-related stock
Occidental Petroleum (OXY).
Meanwhile, Buffett’s
Berkshire Hathaway
BRKA
is just 15% off its all-time highs.
Losers:
Growth Stocks:
Higher interest rates, inflation, slower growth, and lofty valuations are a recipe for disaster for growth-related stocks. Former high-flyers like
Shopify
SHOP
and
Fastly
FSLY
saw selling for most of the year as investors opted for safer bets. After being the top performing area of the market post-pandemic, 2022 marked the end of the euphoria.
Crypto:
“It’s only when the tide goes out that you learn who’s been swimming naked.” A down economy and a risk-off environment exposed crypto in 2022. Not only was the crypto space already moving down, bankruptcy and fraud also led to it spiraling out of control.
The bankruptcy of the crypto hedge fund Three Arrows Capital (3AC) started the snowballing effect, culminating in several crypto frauds being exposed. Next, Celsius, a crypto lender, became the focus of regulators, leading to bankruptcy and the infamous downfall of the Luna coin collapse. Lastly and most prominently is the collapse of one of the largest brokers – FTX. FTX is said to have mishandled (lost) more than $10 billion in client capital. CEO Sam Bankman-Fried is now in custody in the United States. Public companies such as crypto exchange
Coinbase
COIN
and miner
Marathon Digital (MARA)
suffered from the fallout – dropping by more than 85%.
Image Source: Zacks Investment Research
Pictured: Public crypto firms have fallen in tandem with the industry as a whole.
Meta Platforms
META
:
Meta, formerly known as Facebook, was responsible for losses of more than half a trillion dollars in value in 2022. After the social media juggernaut eclipsed a mind-blowing value of $1 trillion early in the year, visionary CEO Mark Zuckerberg decided to steer the company’s focus to the metaverse and research and development. After a lackluster earnings report, Zuckerberg doubled down on the strategy, and investors punished the stock accordingly. While its not clear how Zuckerberg’s bet will play out in the long term, META was amongst the biggest losers in 2022.
Image Source: Zacks Investment Research
Pictured: Meta’s steep 2022 losses.
Cathie Wood:
Cathie Wood, manager of the
Ark Innovation ETF
ARKK
,
came to prominence after being invested in some of the most high-octane growth stocks. As Covid-19 fears subsided, many stocks such as
Teladoc (TDOC)
and
Zoom
ZM
saw their valuations jump years ahead of their growth trajectories as adoption rose due to the pandemic. However, in 2022, reality struck, and valuations of some of the active ETF’s biggest holdings, like
Tesla
TSLA
,
came back to earth.
Image Source: Zacks Investment Research
Pictured: One of Arkk’s largest holdings TSLA is down big in 2022.
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