What really happened to stocks in 2022, including some surprises

2022 was not a good year for stocks. After a banner year in 2021, in which the S&P 500 ETF (SPY) produced a positive total return (price appreciation + dividends) of 29 percent, everything started to fall apart in early 2022. Supply chain problems from COVID, rising inflation, war in Ukraine and rising interest rates drove SPY to a negative total return of 18 percent in 2022. Stock prices were hit by declining valuation multiples and companies lowering guidance.

Growth led the market in 2021 and got hit hard in 2022. The Nasdaq is full of tech and growth stocks; the Invesco QQQ ETF (QQQ), which tracks the Nasdaq 100, declined 33 percent including dividends. Similarly, the iShares Core U.S. Growth ETF (IUSG) was down 29 percent including dividends.

The frothiest stocks in 2021 were SPACs and aggressive growth stocks. The De-SPAC ETF (DSPC) was down 75 percent including dividends, though there weren’t many of them. Cathy Wood’s ARK Innovation ETF (ARKK), which invests in the growthiest of growth stocks, fell by 68 percent including dividends.

Then there’s bitcoin (BTC-USD). Down 65 percent. Enough said.

Bonds, a classic safe haven from stocks, failed in 2022. Bonds were hit by rising inflation and rising interest rates, and performed even worse than stocks. The iShares 20+ Year Treasury Bond ETF (TLT) was down 31 percent including dividends.

Dividend stocks were a mixed picture. High dividend stocks avoided much of the carnage. The Vanguard High Dividend Yield ETF (VYM) had a negative total return in 2022 of only 0.3 percent. However, dividend growth stocks, measured by the iShares Core Dividend Growth ETF (DGRO), had a negative total return of 8 percent in 2022. The ProShares S&P 500 Dividend Aristocrats ETF (NOBL) had a negative total return of 6 percent.

A surprise to many investors: Real Estate sucked. REITs were hit by rising interest rates and lower office occupancy as many workers started working from home during COVID and then refused to return to their offices full time. The Vanguard Real Estate ETF (VNQ) had a negative total return of 26 percent, considerably worse than the S&P 500.

Were there any bright spots? Amid the carnage, energy was the sector to own in 2022. The Energy Select Sector SPDR ETF (XLE) had price appreciation of 52 percent for the year, and including dividends appreciated by a stunning 65 percent.

Then there are the people who got it right. In September 2021, Ross Hendricks told Seeking Alpha subscribers to get out of stocks, explaining why it was The Most Dangerous Stock Market Ever. In January 2022, Paul Franke warned Seeking Alpha subscribers of an impending bond market collapse. In February 2022, Sanjeev Sharma told Seeking Alpha subscribers to get out of S&P 500 stocks. Each of these articles was carefully researched and argued, and nailed the causes as well as the direction of the future decline. One Seeking Alpha subscriber reported he saved a fifth of his retirement savings by getting out of the market after reading Ross Hendricks’ article.