The S&P 500 (^GSPC) rebounded ever-so-slightly on Tuesday, but failed to recoup losses from Monday’s ugly session and hovers closer to a bear market in the midst of sky-high inflation and a hawkish Federal Reserve looking to end easy money at last.
Recent analysis from DataTrek Research, a market research firm, revealed how the index’s performance this year looks in the larger historical context.
“While there’s still 3 weeks of trading left in May, 2022 has been the worst year-to-date return (-16.3 pct) so far relative to overall down years for the index save 1962,” Jessica Rabe, co-founder of DataTrek Research, wrote in an email newsletter.
Based on past data, it is likely that the index will continue to underperform throughout the year, Rabe noted.
“Even if the S&P were able to recover some losses by the end of this month, it’s likely YTD negative return would still fit the pattern of a down January-May period that’s highly typical for losing S&P years,” she wrote.
The S&P 500 entered a free-fall last week, augmenting analysts’ forecasts for a bear market. The index has endured five consecutive weeks of decline, the most since 2011. By midday Tuesday, the S&P 500 was trading at 4,025, slightly up from Monday’s close. If the index drops below 3,854, this would represent a 20% decline from the intraday high, which experts warn could qualify as a bear market.
Losses accelerated last week as investors priced in the Federal Reserve’s decision to raise the target interest rate by .50%, the most aggressive rate hike in 20 years. The move adds to what has already been an extraordinarily hawkish year for monetary policymakers, who have been struggling to slow 40-year high inflation levels that have increased every month.
Other headwinds, including the ongoing conflict in Ukraine and the national labor shortage, have contributed to a poor year for the stock market thus far.
According to DataTrek, S&P 500 losses during the first five months of the year bode poorly for the index as a whole during the rest of the year. Based on historical trends, the S&P 500 will continue to underperform during months June-October when negative returns are recorded during the first five months of the year, however, in November and December losses are generally reigned in and returns flatten out.
“The performance of the S&P during the last two months of a down year is essentially flat on average,” Rabe wrote in the report. “The average return is -1.0 pct from the end of October through the end of December during down years for the S&P.”
This could mean that investors waiting to “buy the dip” may have to wait a little longer before losses subside.
Tech stock losses drive Nasdaq down further than S&P and Dow
The S&P 500 is but one stock market barometer investors use to monitor market performance; the Dow Jones Industrial Average (^DJI) and Nasdaq Composite (^IXIC) are the two other largest stock indices in the U.S.
This year, the Nasdaq has had by far the worst year out of the three. The Nasdaq is down over 4,000 points, or 26% since January, while the S&P 500 is down 17% over the same period. The Dow has declined by 4,500 points, or just over 12%, since 2022 began.
The putrid performance of tech stocks has driven much of Nasdaq’s decline, as the index is very tech-heavy. Seeking Alpha reported Tuesday that new data from Societe Generale (SCGLY), a French multinational investment bank, shows that Nasdaq has lost $7 trillion in market cap in six months, essentially wiping out all of its gain made following the announcement of Pfizer’s coronavirus vaccine.
Ihsaan Fanusie is a writer at Yahoo Finance. Follow him on Twitter @IFanusie.