ARI SHAPIRO, HOST:
It's been a vicious six months for stocks this year. In fact, it's the worst start to a year in more than half a century. The Nasdaq is down 30% and the S&P 500 has fallen 21% as a record-setting run on Wall Street has come to an end. NPR's David Gura joins us now. Hey, David.
DAVID GURA, BYLINE: Hey, Ari.
SHAPIRO: Help us understand how deep these losses have been.
GURA: Well, just six months ago, stocks were at record highs. There was optimism about the economy, a sense that the darkest days of the pandemic were behind us. You know, all that has changed. Companies that boomed during the pandemic, a lot of high-flying, high-growth companies, had a real reversal of fortune. Netflix is a prime example of that. There was a boom in subscriber growth during the pandemic as we binge-watched shows and movies. But now that service is losing subscribers, and that's led Netflix shares to fall a whopping 70% year to date. In fact, it's the worst performing stock in the S&P 500.
If you look at that index, which includes most of the top companies in the country, almost everything is down. There is just one bright spot, and that is energy. Companies like Exxon Mobil are benefiting from oil and gas prices that are at record highs, in part because of the war in Ukraine. But overall, six months in, most stocks are in the red, Ari. And that is such a dramatic change.
SHAPIRO: And what's the reason for that? I mean, why this dramatic change?
GURA: Well, it's inflation mostly, prices rising at their fastest annual pace in more than four decades. A really pivotal moment happened on one day at the beginning of the year, on January 5. The Federal Reserve released the minutes from a meeting at the end of last year. And in that summary, we saw the Fed had suddenly changed its assessment of the harm inflation could do to the economy. So on that day, on January 5, stocks fell dramatically. Interest rates were going up, and this era of cheap money that had lasted for more than a decade was coming to an end. It started this spiral of pessimism in the market that has continued as the Fed has raised interest rates three times.
Mike Wilson is the chief investment officer at Morgan Stanley, and he told me what's making this especially challenging is that the Fed is hitting the brakes on the economy just as the economy is already slowing.
MIKE WILSON: So the combination is like a vise, right? You have tightening financial conditions into slowing growth, and that's just a really bad recipe for stocks.
SHAPIRO: Any sense of how long this is likely to last?
GURA: Well, investors and economists are scrutinizing every piece of economic data to see if the tough medicine the Fed is administering - these higher interest rates - if they're working. And the big fear is the Fed may tip the U.S. economy into a recession. Fed Chair Jerome Powell continues to say he's confident the Fed can do this. But in recent weeks, he's been very forthright about the risks and how challenging this is. Now, if in the coming months there are signs the Fed is succeeding, well, markets will stabilize. But if in the coming months there's a sense the Fed doesn't have a handle on things, if inflation is still out of hand, then all bets are off.
SHAPIRO: Is there any good, safe place for people to invest their money right now?
GURA: It is really tough. We have been talking about stocks, but something that's made the last six months incredibly difficult for investors is there's really nowhere to hide. You know, usually when stocks go down, the value of bonds go up. But that correlation has broken down. Yung-Yu Ma is the chief investment strategist at BMO Wealth Management.
YUNG-YU MA: It hasn't been this bad since the 1930s. You have to go back many decades to find a time when that combined performance of stocks and bonds is this bad.
GURA: Now, some have touted cryptocurrency as a potential safe haven, but that has not come to pass as the value of crypto has been decimated along with the stock market. And gold has been pretty much flat this year. This has been and continues to be a really tough time for a lot of investors, but especially for retirees who've seen their portfolios fall in value at a time when they're paying more for things. Because of inflation, Ari, their money is worth less.
SHAPIRO: NPR's David Gura, thank you very much.
GURA: Thanks, Ari.
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