NATIONAL NEWS

The S&P is having its worst start to a year since 1939

May 2, 2022, 1:45 PM | Updated: Jun 8, 2022, 3:15 pm
NEW YORK, NEW YORK - MAY 02: Traders work on the floor of the New York Stock Exchange (NYSE) on May 02, 2022 in New York City. After falling over 60 points on Friday, stocks were up slightly in morning trading. (Photo by Spencer Platt/Getty Images)
(NYSE)

(CNN) — The S&P 500 fell more than 13% between January and April of this year. That’s the worst four-month start to a year since 1939, when longtime legendary investor Warren Buffett was just nine years old.

Comparing today’s stock market to 83 years ago isn’t an entirely apples-to-Apple comparison — for one, the S&P was made up of only 90 companies back then. But it has clearly been an abysmal first third of the year for investors from any reference point. The Dow was down 9% through April and the tech-heavy Nasdaq plummeted 21%.

The selling abated a bit on the first trading day of May. The Dow was down 0.1% late Monday in what was a volatile day of trading. The S&P 500 was flat while the Nasdaq was up 0.9%.

There is an old Wall Street adage that many investors “sell in May and go away.” It’s a pithy reference to the theory that bullish traders take a break during the summer and early autumn months and that stocks will typically fall until just before the winter holidays.

But this year the big sell-off may already have happened, as there appears to have been a fair amount of panic-induced stock selling recently. The CNN Business Fear & Greed Index, which measures seven indicators of market sentiment, was in Fear mode after briefly falling into Extreme Fear territory Monday.

Investors already have gone away … and might now come back

The market has plenty to worry about. The Federal Reserve is about to start raising interest rates more aggressively to fight inflation. Covid variant concerns and lockdowns in parts of China are spooking global investors. Then there’s Russia’s invasion of Ukraine. All of these factors have led to mounting recession worries.

Tech stocks have taken the biggest hit, with Amazon, Facebook owner Meta, and Netflix falling particularly hard. In fact, onetime investor darling Netflix, which is down a stunning 68%, is the worst performer in the S&P 500 so far this year.

But there’s another pithy saying among traders: “Stocks climb a wall of worry.” Markets often rally in troubling times, partly because investors are looking ahead to a rosier future when all those fears diminish.

So is the worst for stocks still yet to come, or is the market finally close to bottoming? Some strategists see reasons for optimism.

“The markets are likely giving too little credence to supply chain progress, anti-inflationary policy moves, and energy market resilience — all of which appear to be moving in the right direction and could improve sentiment and valuation in due course,” Robert Teeter, managing director of Silvercrest Asset Management, said in a note Monday.

Teeter added that the jobs market remains healthy and that earnings reports for the first quarter have mostly been “respectable” despite “several prominent stumbles,” mainly in tech.

“With much of the bad news out in the open and the prospect of better news in store, investors may be prudent to extend their time horizon as problem-solving takes hold,” Teeter added.

Stagflation worries persist, but so far, it’s all ‘flation’ and no ‘stag’

American consumers aren’t showing signs of being too worried just yet.

Although confidence and sentiment measures have been declining due to inflation concerns, retail sales remain strong, a phenomenon that some economists have dubbed “revenge spending” following two brutal pandemic years. And as far as corporate profits go, actions speak louder than words.

“After two years of Covid restrictions, people want to get out and have the means to do it. Household cash has exceeded debt for the first time in three decades,” said Linda Duessel, senior equity strategist with Federated Hermes, in a report last week.

“Corporate America is in great shape, too,” she added. “Profits and cash flow are at record highs. Profit margins are at or near record highs. S&P 500 earnings estimates keep rising. And corporate balance sheets are flush with cash.”

There are legitimate reasons to be worried that the combination of rising interest rates and higher oil prices could eventually lead to a recession or stagflation, the combination of slow growth and surging consumer prices. But we don’t appear to be there yet, which is good for investors.

What’s more, the whole selling in May and going away strategy has not held true over the past few years.

It’s a quaint idea to think that stocks should stumble in the summer because traders are supposedly hopping on the Jitney to the Hamptons and throwing their phones in the Atlantic Ocean. But last year, the S&P rose 10% between the start of May and the end of October.

According to data compiled last year by LPL Financial, the S&P 500 has averaged a 5.7% gain between May and October over the past decade. The only time the market fell in that period was in 2015.


The-CNN-Wire
™ & © 2022 Cable News Network, Inc., a WarnerMedia Company. All rights reserved.

KSL 5 TV Live

Top Stories

National News

A sign hangs in the offices of the Planned Parenthood Federation of America(Photo by Mario Tama/Get...
Michael Houck, KSL-TV & Associated Press

Planned Parenthood, ACLU sue over Utah abortion ban

'We are forced into motherhood'; Planned Parenthood and the ACLU filed a lawsuit against Utah's trigger law banning most abortions in the state.
1 day ago
FILE...
Associated Press

Officer suspended for off-duty actions at abortion protest

A Rhode Island police officer has been suspended from his job with pay after allegedly punching a woman while off-duty.
1 day ago
A suspected land mine was removed from a Florida beach, according to police. (Credit: Indian River ...
Zoe Sottile, CNN

A suspected land mine was removed from a Florida beach

A suspected land mine was removed from a Florida beach, according to police.
1 day ago
FILE - This July 1, 2016, file photo shows Mega Millions lottery tickets on a counter at a Pilot tr...
Yenny Sanchez, CNN

South Carolina man wins $100,000 lottery after using strategy he saw on TV

A South Carolina man has won more than $100,000 after trying a lottery strategy inspired by an episode of TLC's 'Lottery Changed My Life.'
1 day ago
SEATTLE, WA - MARCH 16: Washington Gov. Jay Inslee, answers a question at a news conference about t...
REBECCA BOONE, Associated Press

Inslee seeks abortion rights amendment to state constitution

Washington Gov. Inslee said he will push for a state constitutional amendment to protect abortion rights within his state's borders.
1 day ago
At least 150 cats were removed from a Winsted home in what police are calling a "cat hoarding" situ...
Evan Sobol & Eliza Kruczynski, WFSB

Police: At least 150 cats removed from Winsted home in ‘cat hoarding’ case

At least 150 cats were removed from a Connecticut home in what police are calling a “cat hoarding” situation.
1 day ago

Sponsored Articles

hand holding 3d rendering mobile connect with security camera for security solutions...
Les Olson

Wondering what security solutions are right for you? Find out more about how to protect your surroundings

Physical security helps everyone. Keep your employees, clients, and customers safe with security solutions that protect your workplace.
Many rattan pendant lights, hay hang from the ceiling.Traditional and simple lighting....
Lighting Design

The Best Ways to Style Rattan Pendant Lighting in Your Home

Rattan pendant lights create a rustic and breezy feel, and are an easy way to incorporate this hot trend into your home decor.
Earth day 2022...
1-800-GOT-JUNK?

How Are You Celebrating Earth Day 2022? | 4 Simple Ways to Celebrate Earth Day and Protect the Environment

Earth Day is a great time to reflect on how we can be more environmentally conscious. Here are some tips for celebrating Earth Day.
Get Money Online...

More Ways to Get Money Online Right Now in Your Spare Time

Here are 4 easy ways that you can get more money online if you have some free time and want to make a little extra on the side.
Lighting trends 2022...

Lighting Trends 2022 | 5 Beautiful Home Lighting Trends You Can Expect to See this Year and Beyond

This is where you can see the latest lighting trends for 2022 straight from the Lightovation Show at the Dallas World Trade Center.
What Can't You Throw Away in the Trash...

What Can’t You Throw Away in the Trash? | 5 Things You Shouldn’t Throw in to Your Trash Can

What can't you throw away in the trash? Believe it or not, there are actually many items that shouldn't be thrown straight into the trash.
The S&P is having its worst start to a year since 1939