The S&P 500 index, representing the top 500 US stocks, was 20% down for the first half of 2022 as trading neared its close for June. Based on historical data, that was the biggest drop in the opening half of any year since 1970.
A 20% drop also puts the S&P in bear-market territory given the general classification for any market that’s down as much or more from its most recent high. In the S&P’s case, it has fallen to under 3,810 points from a record high of 4,818 points in January.
The Nasdaq Composite, which comprises marquee technology names such as Amazon, Apple, Netflix and Google, was down almost 30% for the first six months of the year, a record first-half-yearly loss for the index founded in 1971.
The Dow Jones Industrial Average, comprising stocks of 30 large US corporations, was on track to a first-half loss of 16%. Historical data showed that to be the biggest since 1962.
"Stock markets have fallen heavily in June so it seems only fitting that they're ending the month with big losses as reality continues to bite," Craig Erlam, analyst at online trading platform OANDA, said. "There's a strong likelihood of recession this year or next and investors are increasingly accepting that fate as well."
Economists fear that under its quantitative tightening approach, the Federal Reserve, or Fed, will push the economy into a recession with aggressive rate hikes and the planned sale of hundreds of billions of dollars of bonds in its holdings.
This month’s 75-basis point rate hike was the Fed’s highest in 28 years. The economy contracted by 1.6% in the first quarter of 2022 and will technically slip into a recession if it does not return to positive growth by the end of the second quarter.
St. Louis Fed President Jim Bullard, arguably the central bank’s biggest policy hawk, said earlier this week that the central bank needed to stay ahead of inflation by front-loading interest rates.
Another Fed banker — Mary Daly of the St. Louis Federal Reserve — also supported the front-loading of rates on Monday to halt inflation.
Inflation, as measured by the Consumer Price Index (CPI), has been growing at its fastest pace in four decades since late last year. Latest figures for the CPI showed it expanding by 8.6% in the 12 months to May.