After three years of growth, the fall in the stock market in 2022 was not so surprising. What proved more difficult was the sharp decline in fixed income, which made it very difficult for investors to keep their portfolios from losing feathers.
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“Typically, bonds act a bit like a safe haven. But not this time. It was a very difficult year for returns,” says Lorenzo Tessier-Moreau, economist at Desjardins Group.
America’s flagship S&P 500 index fell about 20%, its biggest annual drop since the 2008 financial crisis, by far. In Canada, the S&P/TSX fared slightly better, but still lost more than 8%. As for the value of Canadian bonds, it lost more than 10% on average.
“We haven’t seen such a steady decline since the 1970s at least. The typical portfolio of 60% stocks and 40% bonds is down about 12%, which is significant. The tightening of monetary policy has led to a downward revision of the prices of all asset categories”, the economists at the Bank of Montreal coldly summarized.
Photo taken from Linkedin
Lorenzo Tessier-Moreau, Desjardins economist.
Raising interest rates in an effort to curb high inflation particularly hurt technology stocks. In the United States, the Nasdaq plunged almost 35%. In Canada, the information technology sub-index plunged more than 30%, led by the fall of Ontario giant Shopify (-70%).
In an uncertain economic environment where financing costs were rising, investors dumped shares of underperforming and indebted companies such as Uber and WeWork.
That being said, even the web giants have tested the markets for bearishness. Alphabet (Google), Amazon, Apple, Meta (Facebook) and Microsoft alone have collectively lost more than $3.5 trillion in value in 2022.
As if that were not enough, the war in Ukraine has also contributed to drag down world stock markets, especially in the Old Continent, where the Euro Stoxx 50 index fell more than 11%.
sky high crude
The conflict, however, pushed up oil prices, which exceeded $100 a barrel for much of the year. This surge in energy prices boosted hydrocarbon traders’ earnings and stock prices, helping the Toronto Stock Exchange avoid falling too sharply.
That said, the virtual non-existence of the Quebec hydrocarbons industry has not prevented the index comprising the 30 largest companies listed here on the stock exchange from outperforming the TSX. The IQ-30 is on track to close the year with a meager drop of 3.6%.
“The Quebec index benefited in particular from the positive contribution of the non-cyclical consumer sector [les biens essentiels] without being exposed to the fall of the real estate sector”, explains Mr. Tessier-Moreau.
QUEBEC ENTERPRISES INC. IN TROUBLED WATERS
The year 2022 will have been particularly difficult on the stock market for many Quebec companies that, until recently, attracted attention for their promises of prosperity. This is in particular the case for cryptocurrency mining company Bitfarms (-90.7%) and cannabis producer HEXO (-88.7%). The same is true of Goodfood, GURU and Loop Industries, which have seen their share values drop by more than 80% in 2022. Vehicle maker Lion Electric (-78.8%), retailer DAVIDsTEA (-77.4 %) and technology Dialogue (-68.9%), Lightspeed (-62.5%), Nuvei (-57.3%) and Coveo (-53.5%) also had a tough year.
LOCAL BUSINESSES RISE DESPITE THE CONTURBATION
Other Quebec companies have managed to weather the headwinds that 2022 brought quite well. Uni-Select, an auto parts distributor, is the year’s big winner. Amid a car shortage, the company saw its value grow by 67.9%. In a completely different area, Resolute Forest Products shareholders were able to benefit from the sale of the company to foreign-owned Paper Excellence. Valued at approximately $3.5 billion, the transaction helped push Resolute’s shares up 55.8%. Finally, in the heart of the inflationary storm, Grupo ADF (specialized in the manufacture of steel structures) and the retailer Dollarama managed to raise their stock market prices by more than 25%.
AVERAGE PERFORMANCE OF THE QUEBEC 30 INDEX
As of December 20, the top 30 Quebec market capitalizations (IQ-30) have produced a negative return of -3.8% in 2022. They are doing better than those of British Columbia (ICB-20) and those of the Atlantic provinces (IA-15), which registered falls of -5.4% and -17.1% respectively. On the other hand, Ontario (IO-40) and Prairies (IP-10) registered returns of +1.1% and -1.5%. Alberta, whose economy is dominated by the exploitation of hydrocarbons, is unique in its class: its index (IAB-25) registered a return of… 17.9%.
DROP IN IPO
As in other parts of the world, the Toronto Stock Exchange (TSX) and TSX Venture Exchange (TSXV) will have welcomed far fewer newcomers in 2022 than last year. As of November 30, 111 companies and funds listed their securities on the TSX and TSXV, down 45.6% from a year ago. As for the number of initial public offerings (IPOs), it was just 17, or 66% less than the record 50 reached in 2021. Of the number, three took place on the TSX and 14 on the TSXV. Of the lot, Valeo Pharma is the only company from Quebec.
Some key dates in the stock market news in 2022
5TH OF APRIL:
▸ The S&P/TSX index reaches an all-time high of 22,213 points. It will stay relatively far for the rest of the year. In the United States, the S&P 500 reached its all-time high on January 4 (4,819 points) and its 2022 low on October 11 (3,569 points).
▸ Bombardier consolidates its shares at a rate of 25 to one, which has the effect of increasing its share price from $1.13 to… $26.86! The Quebec multinational thus wishes to increase investor interest in its shares. Bombardier shares are on track to end the year up nearly 20%.
▸ The US S&P 500 Index is experiencing its worst daily drop of 2022, falling 4.3%. Stronger-than-expected inflation has investors worried that the US Federal Reserve will raise interest rates more than expected.
▸ Terrebonne’s Loop Industries stock fell more than 10% on the Nasdaq, following the filing of a lawsuit by US stock police alleging that a majority Loop shareholder defrauded a wealthy senior by hiding his true identity. Loop’s founder, Daniel Solomita, assured that he had nothing to do with this fraud.
DECEMBER 3, 2022:
▸ The Montreal Goodfood Market share experienced a spectacular rise of 39% on the stock market after the announcement of an improvement in its profit margins. The company preparing the rest of the toutefois in a very difficult position: their sales are greatly souffered by the end of the confinement measures, they are coursier est passé d’un sommet de 13 $ en janvier 2021 à un plancher de 26 cents en november.
▸ The newspaper reveals that the Ministry of the Economy, headed by the highly influential minister Pierre Fitzgibbon, secretly bought $49 million in securities of the Quebec company Lightspeed Commerce. Unusually, this purchase of shares was made last July on the stock exchanges. The ins and outs of this transaction remain mysterious. However, the Quebec government may have wanted to stop Lightspeed’s stock from falling.
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