A Review of the Stock and Bond Markets in 2022

Investment management professional Ralph Byer has worked at Merrill Lynch since 1983. A managing director with Merrill Lynch, Ralph Byer advises clients who invest in the US financial markets.

The year 2022 was difficult for both stock and bond investors. In the stock market, the S&P 500 closed the year down 19.4 percent. This was the second-largest drop in the history of the index since it was established in 1957. The biggest drop was in 2008, when the index fell 38.4 percent.

Technology stocks fared particularly badly in 2022. The Morningstar US Technology Sector Index dropped 31.5 percent, its worst yearly drop since 2008. Some of the industry’s big names like Alphabet and Meta even recorded drops of over 40 percent. It was not all gloom in the stock market, however. Energy stocks had a positive year, boosted by a rise in oil and gas prices.

In the bond market, US core bond funds lost an average of 12 percent. High yield bond funds lost about 9 percent on average, while inflation-protected bond funds lost about 8 percent.

The poor market performance in 2022 was attributed largely to rising interest rates. The Federal Reserve undertook several rate hikes during the year to fight inflation. These hikes tightened capital availability, negatively impacting the stock and bond markets.