Nearly All Of Wall Street--And the Fed--Botched Calls For 2022

The benchmark S&P 500 fell 51% from peak to trough between 2000 and 2002, and by 58% during the period of the global financial crisis.

Likewise, Morgan Stanley’s Michael Wilson -- one of the few bearish voices in December-- said the market’s more than 20% drop still doesn’t fully reflect the risks to corporate earnings.

Nowhere to Hide
From the look of it, all one can do is stash cash under the mattress with gold and US Treasuries -- arguably the safest financial assets in the world -- also sinking.

Stocks and bonds together are on track for their worst quarter ever. Meanwhile, credit markets have also taken a battering.

So far this year the worldwide pool of the safest corporate debt has shed more than $900 billion, marking its worst first-half of a year on record, according to Bloomberg index data. Measures of corporate credit risk are also spiking, with default-swaps insuring the debt of Europe’s high-grade firms sitting at the highest since April 2020.

Perhaps no other asset class has seen as wild of swings in 2022 as cryptocurrencies, however.

For all the calls for Bitcoin to hit $100,000 earlier this year and claims of it being an inflation hedge, the market for digital assets has been in a downward spiral.

Bitcoin has over lost two-thirds of its value since it touched a high of nearly $70,000 in November. Arguments the world’s largest cryptocurrency was akin to gold and an independent store of value have gone quiet. Meanwhile, the crypto ecosystem of miners, traders and exchanges has been under growing scrutiny amid layoffs, freezes on withdrawals and liquidity problems.

It’s still not easy to get anything right in this market. There have been big rallies and big drawdowns, painting a bleak picture. But HSBC’s Kettner said this year’s trigger has been obvious.

“Just like investors were obsessed with the idea of ‘transitory inflation’ last year, the obsession of 2022 so far has been ‘peak inflation,’” he said. Inflation hasn’t turned out to be transitory, nor has it peaked yet. As such, “the last few days have been brutal.”