Bull Market’s Winners Dragged the S&P 500 Into a Bear Market

[view original post]

Stocks that soared during the pandemic rally have been some of the biggest losers in this year’s downturn, a reversal that signals investors’ concerns over the valuations of many risky assets and the broad outlook for inflation and growth.

After the S&P 500 took a steep dive in early 2020 following international lockdowns, large companies in the technology and consumer-discretionary sectors sent the value-weighted index on a historic rebound that culminated in a record close on Jan. 3 this year.

Since then, the benchmark has dropped 22%, closing Monday in a bear market. The conditions driving the skid contrast sharply with those behind the bull run that preceded it.

Despite this year’s slide, eight of the S&P 500’s 11 sectors remain up from the index’s prepandemic high on Feb. 19, 2020, as of Monday’s close.

Energy stocks recorded the sharpest declines early in the pandemic, after demand for crude oil cratered. But the sector has gone from worst to first, rising more than 50% since the S&P 500’s prepandemic high.

The technology sector has fallen sharply during the current bear market but is still up 21% from Feb. 19, 2020.

S&P 500 performance by sector, change from prepandemic high on Feb. 19, 2020

BEAR

MARKET

Jan. 3, 2022

Record close

Energy was the only sector that rose during the slide into a bear market.

Technology

Healthcare

Feb. 19, 2020

S&P 500 prepandemic high

Consumer discretionary

March 23, 2020

Pandemic low

Communication services

The energy sector took the biggest hit during the 2020 bear market.

March 2020

BEAR

MARKET

Jan. 3, 2022

Record close

Energy was the only sector that rose during the slide into a bear market.

Technology

Healthcare

Feb. 19, 2020

S&P 500

prepandemic high

Consumer

discretionary

Communication

services

March 23, 2020

Pandemic low

The energy sector took the biggest hit during the 2020 bear market.

March 2020

BEAR

MARKET

Jan. 3, 2022

Record close

Energy was the only sector that rose during the slide into a bear market.

Technology

Healthcare

Feb. 19, 2020

S&P 500

prepandemic high

Consumer

discretionary

Communication

services

March 23, 2020

Pandemic low

The energy sector took the biggest hit during the 2020 bear market.

March 2020

BEAR

MARKET

Energy was the only sector that rose during the slide into a bear market.

Jan. 3, 2022

Record close

Feb. 19, 2020

S&P 500

prepandemic high

Technology

Healthcare

Consumer

discretionary

Communi-

cation

services

March 23, 2020

Pandemic low

The energy sector took the biggest hit during the 2020 bear market.

March 2020

BEAR

MARKET

Energy was the only sector that rose during the slide into a bear market.

Jan. 3, 2022

Record close

Feb. 19, 2020

S&P 500 pre-

pandemic high

Technology

Healthcare

Consumer

discretionary

Communi-

cation

services

March 23, 2020

Pandemic low

The energy sector took the biggest hit during the 2020 bear market.

March 2020

The communication-services industry is down from its prepandemic level more than any other S&P 500 sector. It includes some of the hottest Covid trades, such as Netflix Inc., whose share price plunged after it reported that it lost subscribers in the first quarter, and Facebook parent Meta Platforms Inc., which is down more than 50% this year.

The market pain spread to retail companies last month after earnings reports from Walmart Inc. and Target Corp. showed rising costs eating into profits. That stoked fears among investors about how some of the country’s largest companies will be able to weather the highest inflation rates in decades.

The Federal Reserve faces the challenge of curbing this rise in prices with a “soft landing,” a term used to describe easing high inflation without causing a recession.

“Growth has to move down, that’s what has to happen for inflation to come down,” Federal Reserve Chairman Jerome Powell said last month in an interview with The Wall Street Journal. “There could be some pain involved to restoring price stability, but we think we can maintain a strong labor market.”

The central bank approved a half-percentage-point interest-rate increase in May, the largest since 2000.

Further evidence of price pressures reported this month could push the Fed to be even more aggressive in its efforts to tame inflation. The Labor Department on Friday said that the consumer-price index rose 8.6% in May from the same month a year ago, the fastest pace of price increases since December 1981. Fed officials will gather in Washington on Tuesday for a two-day policy meeting.

S&P 500 after closing in bear market

Entered bear market

One month later

Three months

Six months

Oct. 21, 1957

May 28, 1962

Aug. 29, 1966

Jan. 29, 1970

Nov. 27, 1973

Feb. 22, 1982

Oct. 19, 1987

March 12, 2001

July 10, 2002

July 9, 2008

Feb. 23, 2009

March 12, 2020

Entered bear market

One month later

Three months

Six months

Oct. 21, 1957

May 28, 1962

Aug. 29, 1966

Jan. 29, 1970

Nov. 27, 1973

Feb. 22, 1982

Oct. 19, 1987

March 12, 2001

July 10, 2002

July 9, 2008

Feb. 23, 2009

March 12, 2020

Entered bear market

One month later

Three months

Six months

Oct. 21, 1957

May 28, 1962

Aug. 29, 1966

Jan. 29, 1970

Nov. 27, 1973

Feb. 22, 1982

Oct. 19, 1987

March 12, 2001

July 10, 2002

July 9, 2008

Feb. 23, 2009

March 12, 2020

Entered

bear market

One month

later

Three

months

Six

months

Oct. 21, 1957

May 28, 1962

Aug. 29, 1966

Jan. 29, 1970

Nov. 27, 1973

Feb. 22, 1982

Oct. 19, 1987

March 12, 2001

July 10, 2002

July 9, 2008

Feb. 23, 2009

March 12, 2020

Entered

bear market

One month

later

Three

months

Six

months

Oct. 21, 1957

May 28, 1962

Aug. 29, 1966

Jan. 29, 1970

Nov. 27, 1973

Feb. 22, 1982

Oct. 19, 1987

March 12, 2001

July 10, 2002

July 9, 2008

Feb. 23, 2009

March 12, 2020

Moving the Market

Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8