Reeling from the after-effects of the pandemic, the American stock market has had a difficult year. Market and supply chain disruptions were brought on by the Russian invasion of Ukraine and China’s Zero COVID Policy. What’s more, to battle the growing inflation, the Federal Reserve raised interest rates seven times, and central banks all over the world followed suit. This has resulted in monetary downturns, economic uncertainty, and an overall net loss across most industries. One of the leading wealth management firms in the US, Menlo Asset Management, breaks down the 2022 market and offers insights into what the future may hold.
Despite the stock market showing more losses than profits, some industries had a strong year. For instance, the energy industry saw gains, with some significant energy related businesses reporting double-digit expansion, and with their Q3 revenues nearly matching those of Apple and ExxonMobil, these companies had a remarkable year.
The healthcare industry saw positive outcomes as well – some large-cap pharmaceutical companies reported double-digit growth, with Merck leading the pack with a 45% increase. This fits into a long-term pattern of consistent growth over the previous ten years. The corporation still has a sizable cash reserve, and even though Pfizer saw a 12% fall, its oral antiviral drug may generate sizable revenues in the upcoming year. The top three companies in the medical distribution sector, McKesson, Cardinal, and AmerisourceBergen, also had a successful year.
With the exception of Boeing, major defense and aerospace stocks outperformed the overall market. Northrop Grumman posted gains of 41% as a result of its space division, which will be building rocket boosters to place Amazon’s 3,000+ communication satellites into orbit in the coming years. The US Government awarded Lockheed Martin a $500 million contract to end a successful year.
On the flip side, Menlo Asset Management’s findings show that the S&P 500 had its worst year since the 2008 financial crisis. Additionally, the tech industry as a whole experienced a sharp drop in everything, from semiconductors to software. Apple has lost the most money this year, losing $846 billion from its market capitalization. The market cap of Meta, which is developing its concept of a “metaverse,” fell by $464 billion, making it one of its biggest losses. NVIDIA (-50%) and TSMC (-38%) were two especially hard-hit semiconductor stocks.
Businesses that specialize in cryptocurrencies faced difficult times in the wake of the so-called crypto winter, the collapse of NFT transfers, and the even greater collapse of FTX. More crucially, the previous year was very difficult for American manufacturers. Tesla’s sales increased by 40% last year, but investors were unsatisfied. The stock of the automaker has been falling since September, and it ultimately finished the year going down to 65%. Even worse results were seen by other pure-play EV businesses.
These are the major points of contention regarding the severity and length of the impending recession shared by the firm. There are still more concerns. Will there be more widespread layoffs in the technology industry in 2023? How long will supply chain problems last? Will offices gradually revive, or has the impact of remote work significantly changed the business real estate equation? Menlo Asset Management hopes to see a steep rise in the industries that incurred losses, especially the tech and pharmaceutical industries. The experts at the firm are hopeful that the current year will be wrapped up with net profits across most industries and that the general sense of uncertainty surrounding the economy will subside significantly.