By Ross Marowits in Toronto
Allan Small said the first half of 2022 turned out to be the worst streak of his 25-year investing career.
Canada’s main stock index ended its weakest quarter since before the pandemic, while U.S. markets suffered their worst six-month stretches in decades on fears that rising interest rates could plunge the economy into a tailspin. recession.
“As we reach the middle of the year, when you look back, I think the first part of the year will only be known for a bloodbath in the markets,” said the senior investment adviser at IA Private Wealth in an interview.
The S&P/TSX Composite Index closed down 217.28 points at 18,861.36 to end the quarter nearly 14% lower, the biggest drop since December 2019. The TSX is closed on Friday for Canada Day, while US markets will be closed on Monday for Independence Day.
In New York, the Dow Jones industrial average was down 253.88 points at 30,775.43. The S&P 500 index fell 33.45 points to 3,785.38, while the Nasdaq composite fell 149.15 points to 11,028.74.
The TSX is down 11% so far this year, while the Dow Jones is down 15%, the S&P 500 is down 20.6% for the worst six months in 50 years and the Nasdaq has fell a record 29.5%.
“I can’t remember a year that started the six months off so badly,” Small said.
The inflation surge was fueled by Russia’s invasion of Ukraine, while supply chain bottlenecks were accentuated by COVID-19 lockdowns in China.
While markets have suffered steep declines in the past due to COVID-19 and the financial crisis, they have always been followed by people buying the dip. This time around, many investors remain on the sidelines after being hammered and uncertain about when markets will bottom.
Economic data released Thursday in the United States indicated that core inflation figures, the Fed’s preferred measure of inflation, rose 4.7% in May. That’s 0.2% lower than April, but still around 40-year highs.
In Canada, economic growth slowed in April to 0.3%, while a preliminary estimate for May suggests it likely contracted by 0.2%. The United States previously said its economy fell 1.6% in the first quarter.
A negative number in the second quarter will mean that the US economy is technically in recession. But Small said many people think the economy is already here and Canada is either in a recession or about to enter one.
Small said he wouldn’t be surprised to see markets rise during a recession in anticipation of things looking up, with inflation falling after peaking.
Real estate and utilities were the only sectors in positive territory on Thursday in a broad-based recession with six of nine sectors down more than 1%.
Health care led the declines, losing 4.1%, Canopy Growth Corp. plunging 18.5% after the pot producer announced a convertible note swap.
Materials lost 3.6% due to lower metal prices, particularly copper.
The August gold contract was down US$10.20 at US$1,807.30 an ounce and the September copper contract was down 7.1 cents at US$3.71 the pound.
“Anytime you’re scared of a recession, these types of metals that are used to build houses and things, the fear is that you won’t need to use as many of these building materials,” he said. Small.
Energy lost 1.7% on lower prices as crude oil fell, shares of Advantage Oil & Gas Ltd. down 6%.
The August crude contract was down US$4.02 at US$105.76 per barrel and the August natural gas contract was down US$1.07 at US$5.42 per mmBTU.
The Canadian dollar was trading at 77.60 US cents against 77.65 US cents on Wednesday.
Shopify Inc. fell 5.6% to push technology lower while Laurentian Bank fell 2.5% to lead a decline in the heavy financials sector.
Small hopes for a better second half of the year after central banks conclude their aggressive interest rate hikes to rein in soaring inflation.
“I don’t know if we’re going to win enough to put us in the green for the year, but hopefully we’ll see a positive second half and make up for some of the losses.”
This report from The Canadian Press was first published on June 30, 2022.
Companies in this story: (TSX:AAV, TSX:WEED, TSX:LB, TSX:SHOP, TSX:GSPTSE, TSX:CADUSD=X)