US stocks suffer major losses in 2022 amid record inflation, rate hikes, strong dollar

By Ovunc Kutlu

ISTANBUL (AA) - US stocks saw major losses in 2022 as record inflation, interest rate hikes, a strong dollar, and heightened uncertainty led to a weak economic outlook and curbed investors' risk appetite.

Among US indices, the Dow Jones and the S&P 500 lost 10% and 20%, respectively, while the Nasdaq plummeted a massive 34% since the beginning of the year, according to data compiled by Anadolu Agency.

In one of its most aggressive monetary tightening cycles in history, the Federal Reserve raised its benchmark interest rate on seven occasions by 425 points to tame inflation that this summer climbed to its highest level in more than four decades.

While monetary tightening has lowered the amount of liquidity in the markets, hampering new investments, especially in the tech sector, higher interest rates by the US central bank have pushed the value of the American dollar higher.

The US dollar index, which is used to measure the value of the greenback against six foreign currencies, including the British pound, euro, Swiss franc, Japanese yen, Canadian dollar, and Swedish krona, jumped to 114.78 on Sept. 28 – its highest in 20 years.

That same day, the euro also fell to 0.9535 against the American dollar, its lowest level in two decades, according to official figures.

Despite a pullback in the fourth quarter, the US dollar index gained 8.8% to 104.40 as of Wednesday, after closing last year at 95.97.

Although the euro showed some recovery against the dollar, it was down 6.5% for the year to $1.0623, from $1.1368.

- S&P falls 20%, Nasdaq dives 34%

Even though major indices on the US stock market made a strong early start to 2022, they began to decline in the second week of the year with expectations of Fed rate hikes.

The Dow Jones industrial average fell approximately 9% this year to 33,070 points as of Wednesday, after finishing last year at 36,338. The blue-chip index is down 10.7% from its 2022 high of 36,952 on Jan. 5.

The S&P 500 was off 20.2% to around 3,803 this week, after ending 2021 at 4,766 points. It dropped 21.1% from its high of 4,818 this year that came on Jan. 4.

The Nasdaq plummeted a massive 34.3% to 10,270 on Wednesday after finishing last year at 15,645. The tech-heavy index dove 34.1% since recording its highest level this year at 15,586 on Jan. 5.

In the technology sector, electric carmaker Tesla saw its share price nosedive the most.

Despite a strong performance in 2021 and climbing to an all-time high of $402.67 on Jan. 5, the California-based firm saw its stock price lose a massive 72% of its value to dive below $113 as of Wednesday.

Investors' concerns about Tesla have been revolving around CEO Elon Musk's Twitter takeover, which could divert his attention from the carmaker, as well as painting an unflattering portrait of his management style, in addition to high inflation and interest rates limiting consumer demand for electric vehicles.

The company also continues to suspend production at its Shanghai facility, due to surging coronavirus cases in China.

- Crude prices reach 14-year high

Oil companies, on the other hand, saw strong gains during 2022 due to rising crude prices.

ExxonMobil's stock value soared almost 80%, nearing $110 per share as of Wednesday, after closing last year at $61.19. Chevron's jumped more than 50% to over $177. It closed 2021 at $117.35.

Crude prices have been on the rise since the end of 2020 due to the reopening of economies from the coronavirus pandemic, as global supply lags behind overall demand. But oil prices skyrocketed with Russia's war against Ukraine in March.

Fears of low crude supply from major producer Russia pushed prices to their highest in almost 14 years.

The price of Brent crude soared to $139 per barrel on March 7, while the American oil benchmark, West Texas Intermediate (WTI), saw its price spike to $130.5 on the same day. Both figures were the highest for the benchmarks since July 2008.

Although both benchmarks are down from their highest levels this year, Brent crude was up Wednesday more than 7% to $83.31 from its 2021 close of $77.78. WTI is up 4% to $78.28 from $75.21.

- Gold, silver fluctuate

In precious metals, gold and silver saw their prices fluctuating with massive swings.

Investors were caught between holding gold and silver as a hedge against record inflation and devaluation in currencies, against the rising value of the US dollar due to Fed rate hikes.

The price of gold climbed to $2,070 an ounce on March 8 before dipping to $1,616 on Nov. 3. It was hovering around $1,804 on Wednesday – a 1.3% yearly loss after closing 2021 at $1,828.

Silver went as high as $26.96 on March 8 before diving to as low as $17.55 on Sept. 1. It was around $23.49 on Wednesday, gaining less than 1% in 2022. It ended last year at $23.27.