Need a Hug?
Bloomberg Businessweek|January 31, 2022
Speculative assets lead a market selloff, but corporate cash could put a floor under prices
By Michael P. Regan, Photo Illustration by 731; Photography by Shane Moore/Animals Animals
Need a Hug?

It’s been an ugly start to the year in the stock market, and many on Wall Street are bracing for it to get even uglier. On Jan. 26 the S&P 500 index was almost 10% below its last high, which was reached on the first trading day of 2022. The Nasdaq-100 index was off more than 14% from its peak in November, while the Russell 2000 Index of smaller companies was down 19% from its latest high.

Market pundits seemed more shaken than those numbers alone would suggest, with talk of long winters and bursting bubbles even amid late-in-the-day rallies as traders tried to “buy the dip.” Perhaps that’s because there’s a sense that the markets are, for the first time in a while, going to have to grit out losses without help from an accommodating Federal Reserve. And while companies themselves are healthy—with strong balance sheets that could eventually help put a floor under equity losses— the long-reigning expectation that risky assets will mostly go up seems to have been broken.

Look beyond the major benchmarks, and it’s easy to find examples of 50% losses—or worse. Cathie Wood’s ARK Innovation ETF, the darling investment vehicle of the pandemic era that soared 153% in 2020, is down almost 56% from the high it touched in February of last year. Cryptocurrencies have been devastated: The price of Bitcoin has been cut almost in half since it sold for nearly $69,000 just two-and-a-half months ago; Ethereum is down even more over the same period.

This story is from the January 31, 2022 edition of Bloomberg Businessweek.

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This story is from the January 31, 2022 edition of Bloomberg Businessweek.

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