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2022's biggest chart trends

Key takeaways

  • 2022 charts show a bearish image.
  • Inflation and interest rates helped shape the charts this year.
  • Some key chart signals, including a golden cross, could foreshadow a different picture for stocks in 2023. 

A chart of 2021 and early 2022 may have helped you forecast a down year globally for stocks this year. The full-year picture may be telling some of the same story heading into 2023, although that could change at any time. Here are 5 of the biggest chart trends that helped shape the market this year—and might provide clues for what to expect.

Stocks fall after big 2021

In contrast to 2021—when stocks marched higher for most of the year—the trend has been mostly bearish in 2022 (see After 2021 rally, stocks fall in 2022 chart). The MSCI World Index is down 21% and the S&P 500 is down 16% year to date on a total return basis (i.e., including dividends).

Stocks fall graph
Source: Active Trader Pro, as of December 15, 2022.

Heading into 2022, it was plausible to expect moderate returns or even a pullback. Stock markets have had multiple instances historically of lower or negative returns after a greater than 20% rally in a single year—like there was in 2021. This happened most recently in 2017 (+21% total return for the S&P 500) and 2018 (-4% total return for the S&P 500).

There are reasons to think 2022's bearish momentum could trickle over into 2023, including moderate recession risks for global economies. With that said, stocks have had a historical proclivity to bounce back from negative returns the following year.

Clues in the charts

Two widely watched indicators foreshadowed 2022's downtrend. After the January barometer gave a negative signal for 2022, a death cross struck the S&P 500 in May. The death cross is a bearish moving average crossover signal that occurs when a shorter moving average crosses below a longer moving average. Since the death cross, the S&P has fallen 6%, and had fallen as much as 13% earlier in the year (see Deathcross emboldens bears chart).

Death cross graph
Source: ActiveTraderPro, as of December 15, 2021.

Looking forward, chart users could see what happens this coming January as well as keep an eye out for a golden cross (where a shorter moving average crosses above a longer moving average) for signals that the downtrend might reverse into an uptrend.

Inflation roller coaster, rates soar

Among many, 2 key fundamental factors helped paint the picture this year: Inflation and interest rates.

The inflation flashpoint was Russia's invasion of Ukraine, which exacerbated the multiyear global supply chain upheaval. Soon after, commodity prices soared, including oil, metals, grains, and fertilizers. Oil prices in particular shocked global markets, sending inflation readings to record levels in the middle of the year (see Oil prices soar, subside chart). Both oil prices and inflation have since subsided to varying degrees. 

oil prices fall graph
Source: FactSet, as of December 15, 2022.

Stocks have battled back somewhat over the past several months, due in large part to declining energy and other commodity prices. With oil prices roughly back to where they were at this time last year, energy costs remain a critical factor for investors to watch going forward.

Meanwhile, the Fed was already raising rates heading into 2022. Surging prices poured gasoline on that trend, accelerating the pace at which the US central bank pushed rates up to fight inflation (see US target rate approaches multiyear high chart). Rates haven't been this high since before the financial crisis, and after the most recent rate hike bullish investors are hoping that the Fed may slow its pace of rates hikes in the coming months if inflation continues to cool down. 

Interest rates graph
Source: FactSet, as of 12/15/2022.

Of course, the recent US yield curve inversion—where short-term interest rates are higher than long-term interest rates—is a widely followed recession indicator that could signal the bearish momentum is not over yet. Regardless, trends in rates are likely to be one of the most important market drivers over the near term.

The earnings picture

Earnings remain the most critical factor for stocks. Resilient earnings growth had been the primary source of strength pushing stocks to record levels last year, with earnings per share (EPS) for S&P 500 companies hitting all-time highs. EPS growth reversed course midway through 2022 (see EPS growth slows chart). 

EPS growth slows graph
Source: FactSet, as of December 15, 2021.

Looking ahead, consensus earnings growth for the current quarter and for Q2 2023 is negative (Q1 2023 is barely positive), potentially casting a shadow over stocks.

With that said, the change in the S&P 500 forward 12-month EPS finally caught up to the change in the S&P 500 price level. Some market watchers previously believed that stock prices had been too high for this reason, and that stock prices would have to eventually slow down. Well, that happened in 2022, and if earnings can once again prove resilient next year, that may be reason to be bullish about stocks in 2023—assuming stock prices follow earnings.

Uncharted territory

There's no shortage of factors at work that might help dictate what 2023 looks like for investors. What's clear from the charts is that things can change at any moment. Many expected 2022 to once again be driven primarily by COVID. That quickly morphed into a multipronged story of rising rates, Russia's invasion of Ukraine, and surging inflation. These factors are still at play to some extent heading into 2023. Keep an eye on the charts for clues to help best position yourself.

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Past performance is no guarantee of future results. Stock markets are volatile and can fluctuate significantly in response to company, industry, political, regulatory, market, or economic developments. Investing in stock involves risks, including the loss of principal. Technical analysis focuses on market action — specifically, volume and price. Technical analysis is only one approach to analyzing stocks. When considering which stocks to buy or sell, you should use the approach that you're most comfortable with. As with all your investments, you must make your own determination as to whether an investment in any particular security or securities is right for you based on your investment objectives, risk tolerance, and financial situation. Past performance is no guarantee of future results. The S&P 500® Index is a market capitalization-weighted index of 500 common stocks chosen for market size, liquidity, and industry group representation to represent U.S. equity performance. The MSCI World Index represents large- and mid-cap equity performance across 23 developed markets, covering 85% of the free float-adjusted market capitalization in each of those countries.

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