It has been a first half for the history books in terms of global equity and fixed income market performance. The highest inflation in 40 years, the largest interest-rate hike since 1994 and the most severe European conflict since World War II were reflected in bear market – or near bear market declines for the Morningstar Global Markets Index (-20.1%), Morningstar US Market Index (-21.3%), Morningstar Europe Index (-23.3%) and the Morningstar Asia Pacific Index (-17%).
Where can investors look to potentially find value as we enter the second half of the year? We have published new research to help investors better understand how the first half of 2022 has reshaped global markets. Key findings include:
- Shrinking Valuations & Rising Yields. As a potential silver lining behind the market clouds of 2022, index-level price-to-earnings ratios are looking much more modest and index-level yields more enticing as we enter the second half.
- Global Sector Shift. Technology stocks saw broad-based declines in the first half of 2022 while energy stocks increased as reflected in their representation within the Morningstar Global Markets Index. Traditional defensive sectors like consumer staples, healthcare and utilities also gained share in 2022.
- The Fall of META. Meta Platforms (META), formerly Facebook, began 2022 as one of the world’s five largest public companies. With a roughly 50% decline in its share price in the first six months of the year, the stock has now fallen out of the top 10.
- Asia & Emerging Markets Gains. Emerging markets increased their representation within the Morningstar Global Markets Index in the first half, as China was one of the best performing markets in the second quarter and Australia benefited from strong demand for natural resources.
Dan Lefkovitz, Strategist, Morningstar Indexes
“While some of the first half of 2022’s market shifts were in retrospect somewhat predictable, the velocity and magnitude of change were astounding. Yet the turmoil of 2022 may contain a silver lining for investors in that both stock and bond markets offer more income than they did at the start of the year. And falling stock prices and rising bond yield have made both asset classes worthy of consideration.”
To speak with Dan Lefkovitz, please reach out to Tim Benedict at tim.benedict@morningstar.com or (203) 339-1912.
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