Goodbye 2022 — and good riddance. Markets close out their worst year since 2008

New York

Wall Street has said goodbye — and good riddance — to 2022, a year most investors would rather forget.

All three major averages were down on Friday, clocking their worst year since 2008 and ended a three-year winning streak.

The Dow fell 73 points, or 0.2{fa54600cdce496f94cc1399742656d2709d9747721dfc890536efdd06456dfb9} Friday, the last trading day of the year. In 2022, the Dow fell about 9{fa54600cdce496f94cc1399742656d2709d9747721dfc890536efdd06456dfb9}.

The S&P 500 was 0.3{fa54600cdce496f94cc1399742656d2709d9747721dfc890536efdd06456dfb9} lower Friday, leaving it down about 20{fa54600cdce496f94cc1399742656d2709d9747721dfc890536efdd06456dfb9} for the year.

The Nasdaq Composite Index was down 0.1{fa54600cdce496f94cc1399742656d2709d9747721dfc890536efdd06456dfb9} Friday, close to its lowest level since July 2020. The tech-heavy index has been battered this year, falling 33{fa54600cdce496f94cc1399742656d2709d9747721dfc890536efdd06456dfb9}.

European stocks also closed out the year on a sour note, down 11.8{fa54600cdce496f94cc1399742656d2709d9747721dfc890536efdd06456dfb9}, securing their worst annual run since 2018.

Russia’s invasion of Ukraine, snarled supply chains and another year of Covid turned markets on their head this year. Inflation surged around the globe and central banks hiked rates at a historic pace to keep price hikes from spiraling out of control. China, the world’s second-largest economy, periodically shut down entire cities to contain the pandemic. Energy supplies were cut off, but recession fears send demand falling in the second half of the year anyway. Intense storms and climate change upended markets, too.

That left few safe places for investors to park their money.

And while stocks had a miserable year, bonds fared even worse. Inflation, massive rate hikes and a super-strong dollar left bonds unattractive to investors.

The return on the S&P US Treasury Bond Index was -10.7{fa54600cdce496f94cc1399742656d2709d9747721dfc890536efdd06456dfb9} in 2022. The 30-year US Treasury bond, at its low, sunk to its worst return, -35{fa54600cdce496f94cc1399742656d2709d9747721dfc890536efdd06456dfb9}, in a century. Corporate bonds had a miserable 2022, too: The return on bonds issued by S&P 500 companies was -14.2{fa54600cdce496f94cc1399742656d2709d9747721dfc890536efdd06456dfb9} this year. The Bloomberg Aggregate US Bond Index had its worst year since the index’s inception in 1977, according to FactSet.

Inflation, which briefly rose above 9{fa54600cdce496f94cc1399742656d2709d9747721dfc890536efdd06456dfb9} in the United States — a 40-year high — hurt economic growth, even as consumers continued to spend. But it mostly damaged corporate profits.

S&P 500 companies’ earnings are expected to have grown just 5.1{fa54600cdce496f94cc1399742656d2709d9747721dfc890536efdd06456dfb9} this year, well below the average annual increase of 8.5{fa54600cdce496f94cc1399742656d2709d9747721dfc890536efdd06456dfb9} that Wall Street posted over the past 10 years, according to John Butters, senior earnings analyst at FactSet.

Energy, which boomed as oil and gas prices surged earlier this year, made up the entirety of Wall Street’s profit gains. Excluding energy, S&P 500 earnings would have fallen 1.8{fa54600cdce496f94cc1399742656d2709d9747721dfc890536efdd06456dfb9} this year, Butters predicted.

Middling-to-miserable profits sent stocks sharply lower throughout the year. Global equity markets lost $33 trillion in value from their peaks.

Generac Holdings, an energy technology solution company, is the worst performing stock in the S&P 500 this year, down about 74{fa54600cdce496f94cc1399742656d2709d9747721dfc890536efdd06456dfb9}. Coming in second is dating app company Match Group, down 70{fa54600cdce496f94cc1399742656d2709d9747721dfc890536efdd06456dfb9}.

Growth stocks, or shares of companies that are expanding their business quickly, got hammered particularly hard. Investors value these firms based on expectations for future profits. Those look less enticing in a world in which interest rates are going up.

Elon Musk’s Tesla is down about 70{fa54600cdce496f94cc1399742656d2709d9747721dfc890536efdd06456dfb9}, making the auto tech company the third-worst performer this year. Meta, Facebook’s parent company, also makes an appearance in the bottom 10 stocks — down 64{fa54600cdce496f94cc1399742656d2709d9747721dfc890536efdd06456dfb9} in 2022.

That’s a huge shake-up: At the start of this year, Tesla was the fifth-most valuable company in the S&P 500 and Meta was sixth. Tesla is now the 11th most-valuable firm in the index and Meta is in 19th place.

Even Amazon, Apple and Microsoft — tech names that have become staples for investors — took major knocks as investors adjusted to an environment in which rates were rising.

There were some winners. The energy sector has returned more than 60{fa54600cdce496f94cc1399742656d2709d9747721dfc890536efdd06456dfb9} this year, significantly outperforming every other S&P 500 sector. No other sector has gained even 5{fa54600cdce496f94cc1399742656d2709d9747721dfc890536efdd06456dfb9} year-to-date.

Occidental Petroleum has been the biggest gainer in the S&P 500, up about 120{fa54600cdce496f94cc1399742656d2709d9747721dfc890536efdd06456dfb9} this year. Constellation Energy is in second place, up about 110{fa54600cdce496f94cc1399742656d2709d9747721dfc890536efdd06456dfb9}, and Hess comes in third with a gain of around 95{fa54600cdce496f94cc1399742656d2709d9747721dfc890536efdd06456dfb9}.

As the sheen came off markets, one of the biggest stories has been the disastrous meltdown in cryptocurrencies. After a dramatic run-up in 2021 to record highs (remember the dogecoin rally?), investors were confronted with an epic collapse. The implosion of parts of the industry once viewed as relatively stable, such as Sam Bankman-Fried’s FTX exchange, sent traders running for cover.

Crypto insiders acknowledge it will probably take years to rebuild confidence. As regulators circle, the heady days of minting profits off memes feel like a distant memory.