The stock market turned upside down last year when the Federal Reserve abandoned its easy-money policies. Many investors say the ramifications are just beginning to ripple through markets.
The central bank has raised interest rates to the highest levels since 2007, stoking mammoth swings across global markets and a steep selloff in assets from stocks and bonds to cryptocurrencies. The tumult that erased more than $12 trillion in value from the U.S. stock market—the largest such drawdown since at least 2001—is expected to continue as rates keep rising.
Analysts at some of the biggest U.S. banks expect the stock market to retest its 2022 lows in the first half of the new year before beginning to rebound. Those at Goldman Sachs expect the S&P 500 to end 2023 at 4000, about a 4% rise from where it ended 2022.
The volatility has been especially punishing for the market’s behemoths. Five big technology stocks accounted for about a quarter of the U.S. stock market’s total declines last year, a bruising selloff reminiscent of the dot-com bust two decades ago.
The S&P 500 ended the year down 19% after the conditions evaporated that had paved the way for years of a nearly uninterrupted stock-market rally and a run in some of the most speculative bets.
Cryptocurrencies tumbled, splashy initial public offerings all but came to a halt and blank-check companies imploded to end the year, a stunning reversal of the mania that swept markets in the previous two years.
The Russell 3000 Value index outperformed the Russell 3000 Growth index by almost 20 percentage points, its largest margin in Dow Jones Market Data records going back to 2001.
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