Investors have had to battle myriad headwinds during the opening six months of 2022, which have combined to form a broad-based sell-off that pushed some assets into bear market territory.
Surging inflation, rising interest rates, the threat of global recession, China’s renewed Covid lockdowns, Russia’s invasion of Ukraine and the West’s sanctions in return have hit markets hard over recent months.
Below, Trustnet uses 10 charts to show how this has affected returns, looking at asset classes, investment factors, fund sectors and other viewpoints to show just how difficult 2022 is turning out to be.
Asset classes
The first chart makes clear just how volatile the past six months have been, with the VIX index – known as ‘Wall Street’s fear gauge’ – spiking 85% during the period.
Global equities ended the first half down 11% from where they started the year, as a broad-based sell-off caused investors to turn their backs on stocks. But the bond market offered nowhere to hide as government bonds and corporate bonds also posted declines.
Performance of asset classes in H1 2022
Source: FinXL. Total return in sterling between 1 Jan and 30 Jun 2022.
Commodities remained one area where prices were rising, owing to supply bottlenecks caused by the Covid lockdowns and Russia’s invasion of Ukraine.
However, even commodities weren’t immune to the risk-off sentiment that has dominated 2022 so far. The S&P GSCI index, which acts as a benchmark for investment in the commodity markets, fell 4.2% in June as investors started to worry that a global recession would dampen the demand for raw materials.
Geographies
Of the major geographical indices, Trustnet looked at, only Brazil generated a positive return in 2022’s opening half. The MSCI Brazil index rose 14% (in sterling) over the six months in question, thanks to the country’s status as an exporter of several key commodities.
All other stock markets declined over the period, with Europe being the worst hit. Investors are worried about the impact of higher energy prices and the risk of a recession, putting them off the region.
Performance by geography in H1 2022
Source: FinXL. Total return in sterling between 1 Jan and 30 Jun 2022.
The UK held up relatively well, with the 4.6% fall in the FTSE All Share reflecting the country’s overweight to sectors such as oil & gas and mining. Meanwhile, Chinese equities had been selling off heavily but bounced in June as Covid restrictions were eased to end the half down just 1%.
What’s missing from the chart is the MSCI Russia index, which posted a 100% loss. This is down to the international community’s reaction to Russia’s invasion of Ukraine, which prompted index builders to write down the value of Russia stocks and remove the country from broader indices like MSCI Emerging Markets.
Commodities
With commodities being such a big part of the current market narrative, we’ve included a wide spread of them in the chart below to show just how strong the price rises have been in 2022 so far.
Performance of commodities in H1 2022
Source: FinXL. Total return in sterling between 1 Jan and 30 Jun 2022.
The strongest rise has been seen in energy commodities such as oil and gas, where supply has been disrupted by the sanctions placed on Russia. But not all commodities ended the period higher as industrial metals such as copper and lead fell as investors worried about the global growth outlook.
Industry, investment style and market cap
Looking at the industries within the equity market and various investment factors at play within them again shows how few places there have been to make money in 2022 so far.
Performance by industry in H1 2022
Source: FinXL. Total return in sterling between 1 Jan and 30 Jun 2022.
What shouldn’t be too surprising is that energy stocks have continued to perform strongly on the back of higher oil and gas prices, with the MSCI AC World Energy index rising by close to 30% since the start of the year.
However, most industries declined over the period with tech and consumer discretionary stocks being hit the hardest.
Performance by investment style in H1 2022
Source: FinXL. Total return in sterling between 1 Jan and 30 Jun 2022.
Much has been made of the rotation away from growth stocks, which prospered under ultra-loose monetary policy but are suffering as higher interest rates today make investors less willing to pay up for future growth, and towards value stocks, which have been unloved for some time but are now in favour.
Value stocks have still fallen in 2022 but the chart above highlights how much further growth stocks have dropped over the same period.
Performance by market cap in H1 2022
Source: FinXL. Total return in sterling between 1 Jan and 30 Jun 2022.
When it comes to market capitalization, large-cap stocks delivered a better result than smaller companies but still fell by more than 10% in 2022’s first half.
Performance by investment style and market cap in H1 2022
Source: FinXL. Total return in sterling between 1 Jan and 30 Jun 2022.
But putting the previous two factors together shows that large-cap value stocks were the best performing part of the market, with a fall of just 1.1% over the six months in question. This is significantly better than the 20% falls facing small- and mid-cap growth stocks.
Funds
The performance of funds during the opening half of 2022 reflects the conditions we’ve seen above, with most sectors handing the average investor a loss.
Performance of equity fund sectors in H1 2022
Source: FinXL. Total return in sterling between 1 Jan and 30 Jun 2022.
All of the equity sectors are showing an average loss for the first half, aside from IA Commodity/Natural Resources, IA Latin America and IA Infrastructure. All three of these are seen as inflation hedges.
Performance of bond fund sectors in H1 2022
Source: FinXL. Total return in sterling between 1 Jan and 30 Jun 2022.
In the fixed income sectors, the IA USD Government Bond peer group is the only one with a positive return. This is down to currency movements: the return is 1.7% in sterling but falls to an 8.8% average loss if it is rebased into US dollars.
Performance of multi-asset fund sectors in H1 2022
Source: FinXL. Total return in sterling between 1 Jan and 30 Jun 2022.
All of the multi-asset peer groups are showing an average loss for 2022 so far, reflecting that the sell-off has affected most assets aside from commodities.
In most multi-asset sectors, the average fund has fallen about 10% aside from IA Targeted Absolute Return, where losses were limited to 1.8%.