Which Stocks Are Working in 2022? Not a lot…
2022 has been a crazy year for stocks. After 3 years of eye-popping gains, the S&P 500 is down 5% with major weakness in tech stocks and small caps.
We've seen the collapse of the Ark Innovation ETF (ARKK) amid a larger crash in growth stocks.
And earnings season has been total chaos with plenty of winners (SNAP, AMZN) and losers (FB, SPOT).
We even had “Ugly Chart Time” on January 21.
But let's shift our tone and ask a more optimistic question: what has been working in 2022?
The answer overall is… energy, banks… and not much else.
The Energy Stock Craze Is Real
In April 2020, oil prices went negative when demand collapsed because of the COVID-19 pandemic.
Fast forward to February 2022, and oil is above $90 at 8-year highs.
So as you might expect, energy stocks are BOOMING.
So as you might expect, energy stocks are BOOMING.The Energy Select Sector SPDR Fund (XLE) fund is up 27% in 2022 after a 46% run in 2021.
OIH is also doing well, up about 25%.
What else is working?
Banks Are Doing Okay
With the rising rate environment, banks are up in 2022, with the Financial Select Sector SPDR Fund (XLF) rising about 4%:
But like everything aside from energy, XLF is off the highs and peaked back in January.
And outside of energy and banks, there are very few stocks up in 2022, period.
We just saw big post-earnings pops in Amazon (AMZN), Snap (SNAP), and Pinterest (PINS)… but they are all down YTD.
And what's not working in 2022?
While the embattled ARKK recently came off the lows, it's still down 23% year-to-date.
Time will tell if the Jim Cramer “drowning” incident on January 27 marked a long-term bottom:
I’ve disagreed with most of Cathie’s investment theses since last year (been in $SARK since its inception), but this is just brutal after today’s price action… @jimcramer $ARKK $TSLA $COIN $HOOD pic.twitter.com/oJ3YynrGfP
— sᴇɴᴛɪɴᴇʟ 🎲 (@KryptoSentinel) January 27, 2022
Small caps remain a sore spot, with IWM down 11% YTD, more than double the SPX' loss:
Social media has been in rough shape, with Meta Platforms (FB) down 30% YTD after its weak earnings report:
Meme stocks are also feeling the pain, with AMC (AMC) down a crazy 42% YTD.
The cannabis sector had a horrible 2021 and things aren't looking much better this year, with MSOS off 14% so far:
But overall, traders appear to have destressed a bit, because the VIX is well off the highs:
The Big Picture: Derisking
The big picture in 2022 remains the same: traders fear rish.
Yes, we are off the lows and sentiment has improved, but traders are looking for confirmation that the recent bounce can extend.
Where can that confirmation come from?
- Growth stocks picking up (ARKK is the easy way to watch them)
- Small caps and tech showing relative outperformance
- Traders buying the dip in risky sectors like biotech and cannabis)