2022 Stock Losers Are This Year’s Winners So Far
Shares fell on Monday after a strong rally last week. Investors may be nervous ahead of the big federal reserve meetinga deluge of Profits of the best technological companies and Friday’s jobs report.
He Dow fell more than 200 points, or 0.6%, while the S&P 500 Y nasdaq it slipped 1.1% and 1.7%. Still, it’s been a strong start to the year for the market, and many of last year’s losers have led Wall Street so far in January.
The communications sector, with its many hard-hit media and technology companies, is the best-performing market group so far in 2023, up nearly 10%, according to data from S&P Global Market Intelligence. It was the worst performing sector in 2022, falling 40%.
CNN owner Discovery by Warner Bros.which plunged nearly 60% last year, is up 55% so far in 2023 and is the top performer on the S&P 500.
various others media companies, old and new, have also enjoyed a resurgence this month. CBS owner Paramount has soared 36%. Disney
(OFF) It’s up 25%. Netflix
(NFLX) has earned more than 20%. (So Much for the Death of Streaming Media?) Facebook and Instagram Owner’s Actions metaplatforms They are also up 25%.
Consumer discretionary stocks, which include many retailers and auto companies, have also enjoyed a surprising rally after last year’s slide. The sector was the second worst performer in 2022 with a loss of around 38%.
Just look at Tesla
(TSLA). Elon Musk’s electric vehicle giant is up 45%. It also had a miserable 2022, losing almost two-thirds of its value last year.
Investors appear to be buying in the hope that the Fed will continue to reduce the size of its rate hikes after several historically large hikes last year and possibly even stop later this year. Increasingly, the sentiment is that the economy could end up heading towards a so-called Soft landing: A slowdown but not a full-blown recession.
Those hopes have fueled other consumer stocks. Amazon
(AMZN) It’s up 20% this year. Carnival Cruise Line Owners
(RCL) and norwegian
(NCLH) are among the top performers in the S&P 500. So are stocks of casino companies Caesars
(WYNN)las vegas sands
(LVS) and MGM
Still, some investors worry that this year’s market rally is eerily reminiscent of past market bubbles.
That’s because it’s not just quality companies that are winning. The resurgence is also clear in meme stock. game stop
(GME) It’s up almost 25%. AMC movie theater chain
(AMC) it has shot up more than 25%. Cryptocurrency brokerage firm coin base has shot up almost 70%, despite the collapse of rival FTX and Coinbase’s own announcement of mass layoffs. Coinbase has been boosted by a rally in bitcoin prices.
Then there are companies like Bed Bath & Beyond
(BBBY) and caravan
(CVNA)which have enjoyed solid earnings this year despite there being rumors of possible bankruptcy filings. Even if these companies avoid chapter 11it is clear that they are financially distressed.
“We have seen speculation come back to the fore,” Steve Sosnick, chief strategist at Interactive Brokers, said in a recent report. Sosnick, without mincing words, has described the rebound in these types of companies as a “flight to shit.”
Others worry that if the stock market stays this foamy, it will push the Fed to keep raising rates much more aggressively than investors expect: “The January crash in stocks won’t last and the more exuberant it gets the market, the more likely the Fed will be more aggressive with rate hikes,” David Trainer, CEO of New Constructs, an investment research firm, said in a report.
“Most investors don’t realize that the Fed also has to fight inflation in the stock market,” Trainer added. “That means investors should buy stocks with good fundamentals and real cash flows and sell the stocks for no gains driven by the narrative that has dominated headlines in recent years.”