After the relative calm of the previous four weeks, markets succumbed to another serious downdraft, taking a further 15% off the NASDAQ.

This recent bout of selling has left the S&P 500 down by 17.5% over the year to date. Over the past 100 years our records show 22 occasions when the S&P 500 has fallen by 15% or more (please get in touch if you would like details). This 23rd such move is beginning to feel like capitulation, it would not be surprising to see a (relief) rally set-in soon.

It was an ‘all fall down’ sell-off as bond markets sank in the wake of the Federal Reserve’s lifting of rates to 1%, the US 10-year yield jumped to 3.12% and credit spreads moved sharply wider in sympathy with equities. Even the commodity markets turned off with copper falling around 13%, gold by 7.5% and, thankfully, the oil price down, though this latter only by a few per cent. The bond markets have tempered the moves over the past week as the mood shifted towards the realisation that growth was becoming a problem. Chinese lock-downs and apparent stagflation in the UK and Europe do not make the job of the central banks any easier as they attempt to ‘normalise’ monetary conditions, shame they didn’t think about that last year.

All the markets suffered though it was the technology sectors that had the worst of it. Netflix shocked the market for the second time this year with another warning on subscriber numbers and their stock fell nearly 50% (more than 70% down over the year to date), disappointed too and their stock slumped by 30%. Tesla (not a tech stock but…) fell 26% concerned about the funding for Elon Musk’s bid for Twitter (now, possibly, in doubt…). Apple and Salesforce were the other big names to have suffered particularly. 

Selling wasn’t limited to technology. Among the industrials, General Electric fell 20% after their Q1 figures, which didn’t seem too bad, Caterpillar fell 11% and Johnson Controls by 17% after their earnings appeared to disappoint. The US and European banks suffered, JP Morgan, Goldman Sachs and Morgan Stanley were all down around 7% while Banco Santander and Deutsche Bank both fell 15%. Some of the UK-listed banks managed to provide some cheer, led by Standard Chartered, which gained 13%. Otherwise, among the financials, the insurers had a rough time with Aon and Axa falling around 16% and Allianz by 9%. 

The consumer staples, mostly, provided some stability and both Kimberly-Clark and Unilever reacted positively to figures and gained around 10%. Relative calm among the pharmaceuticals was spoilt by a steep fall for Roche Holding after they reported that their prospective lung cancer drug had failed during its phase III trials. The oil majors were better on balance without much conviction this month, but the miners were hit quite hard. Anglo American and Rio Tinto falling 20% and 15% respectively as metals prices came under pressure. 

The above article has been prepared for investment professionals. Any other readers should note this content does not constitute advice or a solicitation to buy, sell, or hold any investment. We strongly recommend speaking to an investment adviser before taking any action based on the information contained in this article.

Please also note the value of investments and the income you get from them may fall as well as rise, and there is no certainty that you will get back the amount of your original investment. You should also be aware that past performance may not be a reliable guide to future performance.

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