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For U.S. Stocks, 2022 Is a Year With Almost No Record Highs

Add this to your list of ways the market will defy Wall Street expectations in 2022. It was a year with few new stock index records.

Few analysts or investors expected 2022 to bring back the huge gains seen in 2021. That’s when the S&P 500 closed his 70th trading at a record high. However, according to traders, the lack of milestones in 2022 was surprising.

The S&P 500 closed out 2022 with just one record low since 2012, according to Dow Jones Market Data. The Dow Jones Industrial Average ended the year at 2. And for the first time since 2014, the tech-focused Nasdaq Composite didn’t hit a record close to its name, he finished the year.

The failure to hit new all-time highs has been a maddening year in which assets such as bonds that are usually considered safe and assets that are usually not, such as cryptocurrencies, have fallen significantly. The sell-all market has left many investors paralyzed throughout his year.

After setting a new closing price on January 3, the first trading day of 2022, the S&P 500 continued its decline through the rest of the year. The Dow closed records on his first two trading days of the year in a row, followed by a decline in the S&P 500.

The S&P 500 is down 19% in 2022. It was his worst year since 2008, when US banking heavyweights including Bear Stearns, Lehman Brothers and Wachovia collapsed. The Dow and Nasdaq also posted their worst years since 2008.

A commonly tracked indicator in financial markets, the number of records hit by a stock index is important primarily from a psychological perspective. In recent years, retail and professional investors alike have cheered the rise in aggregates piling up in the market, even on days when the market was down, in the hope that another record would be on the horizon. was Conversely, the downtrend in 2022 has given investors and strategists few investors the confidence to dive in again with both feet.

“When you hear about new records on a daily basis, it has a psychological effect on how people trade,” said Craig Earlam, senior market analyst at Oanda.

As history shows, record droughts often last for years. In 2008, for example, all three of his major U.S. indices ended his year with a record draw as the global financial crisis roiled markets. It took him at least one of the indexes until 2013 to break the record. After the dot-com bubble burst in 2000, the major US indices similarly failed to break records for several years.

Still, that doesn’t necessarily mean that new index records will be impossible in the year ahead. Going back in history, after the sharp crash of Black Monday in October 1987, neither the S&P 500, the Dow, nor the Nasdaq set new records in 1988.

Market performance in 2023 will depend on interest rate developments and the strength of the US economy. Many investors are divided over whether the US will enter a recession, how deep it will be, and whether it could prompt the Federal Reserve to start cutting rates.

Strategists at JPMorgan Chase & Co. expect the S&P 500 to retest its 2022 lows early in the new year, saying the Fed will continue to tighten as the economy weakens.

But they think the second half of the year will be better, at least for the market. Among the reasons, the strategist said:

JP Morgan strategists, led by Marko Kolanovic and Hussein Malik, expect the S&P 500 to end the year at 4200.

Write to Caitlin McCabe at [email protected].

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