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Inflation, rising interest rates and fears of a recession have led the world’s stock markets to experience declines not seen since the worst moment of the pandemic. The S&P 500 index of the New York Stock Exchange fell in the first half of the year as it has not done since 1970.
Investors with their money in stocks will probably prefer to forget about the last six months.
The numbers speak for themselves: The Standard & Poor’s 500 Index, the main benchmark on Wall Street, closed the first half of 2022 down more than 20% after starting the year at an all-time high. It’s the worst start to the year since 1970, when Apple and Microsoft weren’t even founded.
The market has been dealing with uncertainty and fear this year after a sharp rise in interest rates, the worst enemy of the global stock market.
Higher rates may reduce inflation, but they also slow the economy, increasing the risk of a recession. That helped drive down the value of stocks, bonds, cryptocurrencies and other investments over these six months.
Matt Stucky, market analyst, assured that “certainly, we could be in a recession at the moment. (…) Higher interest rates are affecting housing, they are affecting consumer spending. So that could be enough to see another negative GDP reading in the second quarter.”
An economy enters a recession when it accumulates two consecutive quarters of economic contraction. And the United States has just confirmed a decline of 1.6% in the first quarter of the year, in which the effects of the war in Ukraine were not yet noticeable.
In Europe, amid inflation in the euro zone at record highs, the most affected were the banks in the worst semester since the 2008 crisis, while, in Latin America, the Buenos Aires Stock Exchange managed to go against its pairs and grow a little more than 3% until June.
European stocks wrap their worst half-year period since 2008, marked by extreme volatility as prices soared, central banks turned hawkish and Russia invaded Ukraine https://t.co/OHMMLfQVa2
—Bloomberg (@business) July 1, 2022
More expensive oil driving fuel prices to record highs
One of the main consequences for the world of the Russian invasion of Ukraine has been the exit from the market of a large part of the supply from Russia, one of the main producers and exporters of crude oil. And the prices bear this out.
The price of a barrel of oil in international markets has shot up between 40% and 45%, depending on the reference, causing an increase never seen in fuel prices and fueling waves of protests that range from Ecuador and Panama, to Sri Lanka and many others.
With Reuters, EFE and AP
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