ETFs On Track For Worst Year In Decades

2022 could turn into the worst-performing year for stocks since 2008, and the worst year for bonds on record.

sumit
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Senior ETF Analyst
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Reviewed by: Sumit Roy
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Edited by: Sumit Roy

The bear market in U.S. stocks reached new depths Thursday, a day after the Federal Reserve hiked interest rates by the largest amount since 1994.  

The S&P 500 was down 3.2% to 3,670 by midday, more than reversing Wednesday’s post-Fed 1.5% relief rally. With the day’s losses, the index is now lower by 22.4% on a year-to-date basis—a historically horrible return. 

If the year ended here, the S&P 500 would register its worst annual decline since 2008 and its second-worst annual decline since 1974. On a total return basis, the index lost 37% in 2008 and 26.5% in 1974. 

The S&P 500 dropped by 22.1% in 2002, the year in which the index troughed following the busting of the dot-com bubble. 

What makes this year’s decline in stocks especially perilous is there has been no counterweight from bonds, which typically rise in times of market and economic stress. But this time around, surging inflation and a hawkish Fed have sent bonds in the opposite direction, negating their traditional safe haven role.  

The Bloomberg US Aggregate Bond Index is down by 11.7% year to date, its worst decline ever. 

Losses Across The Board  

The one-two punch of declining stocks and bonds has taken a toll on ETFs across the board. The SPDR S&P 500 ETF Trust (SPY) is down by 22.7% year to date, while the iShares Russell 2000 ETF (IWM) is lower by 26.1%. 

Meanwhile, the iShares Core US Aggregate Bond ETF (AGG) has lost 11.8%; the iShares 7-10 Year Treasury Bond ETF (IEF) is lower by 13%; and the iShares 20+ Year Treasury Bond ETF (TLT) is down by 25.2%. 

Corporate bond ETFs like the iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD) and the iShares iBoxx $ High Yield Corporate Bond ETF (HYG) shed 17.4% and 13.7%, respectively. 

Rare bright spots have been the SPDR Gold Trust (GLD), which is hanging on to a 1% gain, and other commodity-focused funds, like the United States Commodity Index Fund (USCI), the United States Oil Fund (USO) and the Energy Select Sector SPDR Fund (XLE), which are up by 39.4%, 62.1%, and 40.1%, respectively. 

 

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Sumit Roy is the senior ETF analyst for etf.com, where he has worked for 13 years. He creates a variety of content for the platform, including news articles, analysis pieces, videos and podcasts.

Before joining etf.com, Sumit was the managing editor and commodities analyst for Hard Assets Investor. In those roles, he was responsible for most of the operations of HAI, a website dedicated to education about commodities investing.

Though he still closely follows the commodities beat, Sumit covers a much broader assortment of topics for etf.com, with a particular focus on stock and bond exchange-traded funds.

He is the host of etf.com’s Talk ETFs, a popular video series that features weekly interviews with thought leaders in the ETF industry. Sumit is also co-host of Exchange Traded Fridays, etf.com’s weekly podcast series.

He lives in the San Francisco Bay Area, where he enjoys climbing the city’s steep hills, playing chess and snowboarding in Lake Tahoe.