The first half of 2022 will not be remembered fondly by investors after the S&P 500 index dropped 20.5%, its fifth worst performance on record and on par with 1970’s 21% drop.
It has been a year of breaking records for all the wrong reasons. Between January and April, the index fell by more than 13% and the last time that happened was 1939, when Warren Buffet was contemplating making his first investment at the age of nine.
It isn’t all bad news though, in the second half of 1970 the S&P gained 27%, but historically there isn’t a reliable pattern between first and second half performances. The outlook will depend heavily on central bank policy and the stickiness of inflation.
WALGREENS BOOTS ALLIANCE
Having originally hoped it would be collecting billions of dollars from the sale of Boots in mid-2022, US owner Walgreens Boots Alliance now intends to invest more money into the UK retailer rather than sell it.
It didn’t have much choice because interested parties didn’t offer enough to buy Boots, so making improvements to the business is a logical next step and could help it get a better price when market conditions are more favourable to a disposal.
Walgreens’ investors might have been taken aback by the plan, particularly as the parent group just reported a squeeze on group profits. Quarterly sales fell and profits were hit by a fall in Covid vaccine demand, more investment in its healthcare operations and an opioid settlement with the State of Florida. The shares dived 7.3% on the day.
Fighting at the bleeding edge of new technology can make investors fickle friends, and it doesn’t help sentiment when you don’t come first. Taiwan Semiconductor Company (TSM:NYSE) was beaten to the punch on 3nm, or three-nanometre, node fabrication technology by Samsung (005930:KRX), a jump forward in power consumption, processing power and speed.
TSMC is set to launch its own 3nm nodes later this year and has 2nm in the pipeline for 2025 so it’s really a dent to pride than anything else. But there are other things for investors to worry about, issues that led the Wall Street-listed shares to fall more than 10%.
Struggling to retain engineers in an intensifying battle for tech talent and a warning that Taiwan’s precarious power and water supplies could potentially impact its operations on the island are likely to weigh on investors’ minds more heavily. So, too, signs that major TSMC clients may be on the cusp of scaling back chip orders for the rest of 2022, which may prompt the pure-play foundry to cut its revenue outlook for 2022, say industry sources.
BED, BATH & BEYOND
Talk about going down the plughole; the former meme stock dropped more 30% and saw its chief executive booted out after another plunge in quarterly sales over the past week.
Bed, Bath & Beyond’s (BBBY:NASDAQ) sales dropped 25% year-on-year to $1.46 billion in the first quarter to May, missing the $1.5 billion Wall Street was looking for, with losses going from $51 million to a gaping $358 million. The retailer bemoaned the ‘steep inflation and fluctuations in purchasing patterns’ combined with dwindling household goods demand for leaving it with higher inventories that will need to be steeply discounted if it is to be shifted.
It’s a far cry from 2020’s halcyon days, when buyers squeezed out share price shorters to dramatic effect, the stock surging from $5 to $34 as investors bet on pandemic lockdowns leading to sustained online purchases. Not so, it seems.