A version of this story first appeared in CNN Business’s Before the Bell newsletter. Not a subscriber? You can login exactly here.
Americans are getting ready to celebrate Thanksgiving. But investors in the United States (and the rest of the world, for that matter) don’t have much to thank for what’s proving to be a rotten 2022.
The S&P 500 is down 17% this year, and the tech-heavy Nasdaq is in a bear market after plummeting nearly 30%. Cryptos have crashed. AMC (AMC), Bed Bath & Beyond (BBBY), and other meme stocks have imploded. The housing market is showing signs of strain. There’s not much to cheer about in this market and economy.
“2022 was a timely reminder that volatility is a trait of financial markets, not a flaw,” said Scott Clemons, chief investment strategist at BBH. “We have enjoyed upside volatility from 2020 to 2021, and 2022 has reminded us that what goes up will occasionally go down.”
But Thanksgiving should be a happy time, so how about we take a look at some of the bright spots in the market this year?
There’s a saying on Wall Street that there’s always a bull market somewhere. This also applies to this year. Oil stocks have been big winners this year thanks to the rise in crude oil prices… boosting sales and profits.
The S&P Energy Select SPDR ETF (XLE) is up nearly 65%. Warren Buffett/Berkshire Hathaway (BRKB)-backed Occidental Petroleum (OXY) leads the S&P 500 and has more than doubled this year. Chevron (CVX) is the top stock on the Dow, up about 55%.
Additionally, many big oil companies have rewarded investors with higher dividends, as fund manager Janus Henderson noted in a recent report: “Rising energy prices led to a significant increase in dividends…as oil companies paid record profits to shareholders,” the company wrote.
Janus Henderson said total dividend payments for energy stocks rose 7% in the third quarter to nearly $416 billion … and 90% of oil companies either increased their dividends or held them steady, with some energy companies choosing to pay one-time special dividends to pay.
This could raise further concerns among politicians who want to tax windfall oil company profits. At least for now, energy investors are reaping the rewards.
Of course, dividend stocks haven’t been the only way for investors to make more money this year. The bond market was a lucrative source of income as rising US and global interest rates pushed yields higher.
“Investors can get carried away by the excitement of the stock market, but now is the time to look at the bond market,” said Brian Overby, Ally’s senior markets strategist, in a report. He noted that investment-grade fixed-rate corporate bond yields are above 5.5%, not far from their highest levels since 2009.
Overby added that short-dated US Treasuries offer good value with yields above 4%. And there are also opportunities for investors looking for a little more risk…and potential return.
“Volatile parts of the bond market, such as Bonds, such as US speculative fixed-rate bonds and emerging market bonds, are posting returns in the high single digits,” Overby wrote.
Finally investors who have bet versus The stock market can also thank you for this year’s volatility. … owe a lot?
Short sellers who borrow shares and sell them in hopes of buying back the shares at a lower price and profiting from the difference when they return them to the lender have much to be grateful for.
Shorting is an inherently risky strategy, but not for the faint of heart. But there are ETFs that make it easier for average investors to bet against the market, and they’ve been big winners this year. A ProShares ETF (SH) that backs the S&P 500 is up almost 15% in 2022, while the ETF that shorts the Nasdaq 100 (PSQ) is up 28%.
Bearish investors who went a few steps further and shorted crypto-related stocks have fared even better in 2022, especially after the spectacular collapse of former crypto king FTX.
“Shorting crypto stocks has been a profitable business in 2022, with short sellers up nearly 90% this year,” said Ihor Dusanivsky, managing director of predictive analytics at S3 Partners, a research firm.
Dusaniwsky noted that crypto short sellers are up almost 10% in November alone, with much of the short selling centered on Square-owner Block (SQ) and Coinbase. Block (SQ), led by former Twitter CEO Jack Dorsey, is down nearly 60% this year, while Coinbase is down more than 80%.
It’s not just crypto that’s having a tough year. The entire tech sector is underperforming and investors will be looking for signs that 2023 is getting better as multiple tech companies report earnings this week with shortened bank holidays. (Wall Street is closed on Thursdays for Thanksgiving, and Black Friday has a shortened trading day.)
Video conferencing leader Zoom (ZM) reports results on Monday. Analysts are forecasting an earnings decline and a meager 5% year-over-year increase in sales.
The company is no longer enjoying the boom it experienced at the start of the pandemic in 2020, after more workers returned to offices. The stock is down more than 55% this year.
PC giants Dell (DELL) and HP (HPQ) are also reporting results this week. Desktops and notebooks may not be as popular with average consumers as they were before the smartphone and tablet era, but both companies still generate a large portion of revenue for so-called enterprise or corporate customers.
So it’ll be interesting to see if Dell and HP benefit from the same back-to-work trend that’s hurting Zoom. Their current quarters aren’t expected to be strong, but their outlook could be key to what’s next for the market.
Analysts are forecasting a year-over-year decline in sales and earnings for both companies. Dell and HP stocks are each down more than 20% this year.
Monday: China sets policy rate for loans; Earnings from Smucker (SJM), Dell, Agilent (A) and Zoom
Tuesday: Earnings from Baidu (BIDU), Best Buy (BBY), Medtronic (MDT), Dollar Tree (DLTR), Analog Devices (ADI), Dick’s Sporting Goods (DKS), Abercrombie & Fitch (ANF), HP and Nordstrom (JWN)
Wednesday: Eurozone and UK Flash PMI; Weekly Unemployment Claims in US; US Durable Goods, US New Home Sales; consumer sentiment in the United States of America; Federal Reserve Minutes; Result of Deere (EN)
Thursday: US markets are closed for Thanksgiving
Friday: US Stock Market Closes at 1:00 PM ET on Black Friday; Japan CPI