What Did 2022 Teach Us? Well, Here’s One Lesson It Did:
2022 is now behind us, and 2023 has now begun its infancy, and frankly, it is a welcome sight, because 2022 was loads of problems for the stock market and the economy.
When we look back on 2022 ten years from now, there are lots of words that may come to mind quickly, and none of them quite good. “The Fed” will be a popular one, as their decision to continually raise interest rates higher and higher has been met with much backlash. “Inflation” is another key word, as it has impacted Americans across the board from energy to produce to rent. And maybe the word “Bear”—because the stock market really took a big hit in 2022. It was down nearly 20%, the most in a year since the 2007 recession. So as much as we are all ready for 2023 to begin and bring better things, there can be lessons to learn from 2022.
The one that really stood out to me was that, as bad as the market was last year, many of the biggest stocks in the S&P 5000… actually did worse. That’s right, some of the top stocks in the S&P 500 were worse than average. For starters, Tesla was down nearly 70%, Google was down 37%, Microsoft was down 27%, Amazon down 49%, Nvidia down 48%, and Meta was down 60%. So in a year when the stock market saw one of its biggest down years in decades, the big companies saw even worse returns.
When it comes to investing, it seems “bigger” doesn’t always mean “better”. Having a diversified portfolio does not simply consist of having the top 10 stocks in the stock market. If one were to have taken that approach in 2022, they would have seen bigger losses than someone who put money into all 500 stocks in the S&P. Even though most of these companies are extremely well known and very successful, even they have shown they are not impervious to bear markets. As we have stated many times at Emergent, a “diversified” portfolio is more than a collection of different stocks—even some of the biggest and most successful—it is a portfolio that can provide relief and security during bear markets, and ride the upswing of the markets during bullish times, and 2022 has proven that once more. Now we’ll see what lessons 2023 brings.
