The 2022 Stock Market Stats: Pops and Drops!

Below is a picture of the 2022 US Stock Market daily returns as measured by the S&P 500 Index through December 16th. In looking at the chart below, it’s rather obvious: 2022 will be a down year. The S&P is down 19%… There are ten trading days left in the year; as such, it seems highly probable 2022 will be a down year regardless of whether there is a Santa Claus rally to finish the year. What’s not obvious are some of the market’s internal statistics. Let’s explore the underlying data.


In the chart represented above, there are 242 trading days. Of those 242 trading days, 104 of them have been up days; that’s about 43%. Conversely, 138 have been down days, which is 57%. Compare this to the long term in which about 53% of trading days are up days. So, if this were a more “normal” year, we’d be something closer to 128 up days.

Interestingly, the average return on up days is 1.31% while the average return on down days is -1.12%. So, even though up days have been sparser, we’ve been getting a bigger “pop” on up days than the “drops” we’ve gotten on down days.

Let’s look at the Nasdaq Index for some perspective. Below is a chart of the NASDAQ over the same period. It is down 32% on the year to date—much worse than the S&P 500 Index. This is because the NASDAQ is heavily populated with large tech stocks, which have been hard hit this year. How do the NASDAQ internal statistics compare to the S&P?



Interestingly, the NASDAQ Index has experienced 107 up days (three more than the S&P 500 Index) with an average return of 1.69% (a full 38 basis points better than the S&P 500’s up days). Conversely, on down days the NASDAQ has lost 1.58%, much worse than the S&Ps down day loss of 1.12%. So, NASDAQ has exhibited both bigger “pops” and bigger “drops” than the S&P as it has declined 12% more than the S&P has.

Why is it playing out this way? This year we have seen rising interest rates in response to the inflationary threat. Stock valuations (the price the markets are paying for a dollar of earnings) have been declining. Nasdaq valuations started the year much higher than the S&P 500 Index. Some of that valuation premium is justified based on the superior growth characteristics of some of these technology companies. But, nonetheless, in a down market, the higher valuations get hit harder. This makes rational sense given the interest rate environment. Such is the nature of market cycles. This cycle will pass, and we will return to more normal return experiences sometime in the future. When that will be is uncertain, but we are getting closer.

One final comment. WealthPlan has managed a high dividend yield growth strategy we call “The Dividend Aristocrats Portfolio” for many years. This strategy received a five-star rating from Morningstar this year (see the post here) that had a great year in 2022 owing to our strict adherence to our proprietary stock selection criteria.* This strategy has demonstrated the merit of our investment philosophy in these difficult times. We’d be delighted to tell our story if you’re willing to listen. Give us a call!




*The Morningstar Rating™ for funds, or “star rating”, is calculated for managed products (including mutual funds, variable annuity and variable life subaccounts, exchange-traded funds, closed-end funds, and separate accounts) with at least a three-year history. Exchange-traded funds and open-ended mutual funds are considered a single population for comparative purposes. It is calculated based on a Morningstar Risk-Adjusted Return measure that accounts for variation in a managed product’s monthly excess performance, placing more emphasis on downward variations and rewarding consistent performance. The Morningstar Rating does not include any adjustment for sales loads. The top 10% of products in each product category receive 5 stars, the next 22.5% receive 4 stars, the next 35% receive 3 stars, the next 22.5% receive 2 stars, and the bottom 10% receive 1 star. The Overall Morningstar Rating for a managed product is derived from a weighted average of the performance figures associated with its three-, five-, and 10-year (if applicable) Morningstar Rating metrics. The weights are: 100% three-year rating for 36-59 months of total returns, 60% five-year rating/40% three-year rating for 60-119 months of total returns, and 50% 10-year rating/30% five-year rating/20% three-year rating for 120 or more months of total returns. While the 10-year overall star rating formula seems to give the most weight to the 10- year period, the most recent three-year period actually has the greatest impact because it is included in all three rating periods.

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