After frantic sell-off in the first half of the year, investors are taking a breather. The S&P 500 index of American stocks, for instance, is back around the level it was at the start of June. Yet with a little less than five months of 2022 remaining, it would take a turnaround of astonishing proportions to avoid a torrid year in financial markets. The period’s distinguishing characteristics are already clear: the slump has been unusually deep and unusually broad.
If the year ended now, an investor in the MSCI All Country World Index of global stocks would have lost 15%, the lowest return since 2008. The broad-based decline across asset classes has added another element of pain, too. Most obviously, both stocks and bonds have been hammered. The good news is that distress has been concentrated among a few types of assets and firms. Whether that silver lining remains come the end of the year is uncertain.