Could 2022 Be Worse For Investors Than 2008? (2024)

No one believed that 2022 would be this bad.

It’s strange that investors should have such a miserable time two years after the beginning of the Covid-19 pandemic, but we’re living in unusual times.

Markets have tanked thanks to four-decade highs in inflation and the Federal Reserve’s hawkish response. No major asset class—stocks, bonds, real estate, crypto—has gone unscathed.

Average investors must maintain a stiff upper lip until prices return to normal.

“Average investors are feeling very raw and exposed,” says Aoifinn Devitt, chief investment officer at asset-management firm Moneta. “This has been an absolutely shocking year with no place to hide.”

Still, the general temperature of the economy and the nation at large isn’t nearly as dire as it was almost 15 years ago in 2008.

Sure, the economy contracted in the first half of the year, but the unemployment rate is very low and wages are rising—even if they’re not keeping up with inflation. The banking system is not ready to melt down, for instance.

Given the terrible conditions in 2022 so far, should more doom-and-gloom occur? Let’s break down the numbers.

Inflation Is Worse in 2022

Consumer Price Index (CPI)

• 2008: -0.02%
• 2022: +8.3%

This one is no contest: Inflation is much worse today than in 2008.

Prices, as measured by the consumer price index (CPI), are rising faster than at any time since the 1980s, and that’s on top of big gains in 2021. Experts don’t expect inflation to return to normal until sometime after 2023.

While consumers bear the brunt of more expensive meat and rent, investors are getting shellacked by the Fed’s aggressive hawkish turn toward higher interest rates and quantitative tightening.

This wasn’t a problem in 2008 when interest rates were near zero and the economy still wasn’t growing.

The Stock Market Was Worse in 2008

S&P 500 Index

• 2008: -37%
• 2022: -19%

The financial crisis of 2008 was punctuated by dramatic moments that illustrated how the stock market was performing.

Lehman Brothers collapsed, for instance. The CEOs of the nation’s biggest banks begged the New York Federal Reserve Bank for financing. U.S. Treasury Secretary Hank Paulsen begged House Speaker Nancy Pelosi to help pass a titanic bank bailout, the notorious Troubled Assets Relief Program (TARP).

One metric certainly backs up the melodrama: 2008 was a much worse year than 2022 for stocks. When you factor in inflation-adjusted returns, the performance of the S&P 500 in 2008 was only about 10 percentage points worse than in 2022 so far.

Beyond the numbers, however, in 2008, it really did feel like the entire financial system was collapsing. That’s not remotely true today.

The Bond Market Is Worse in 2022

Morningstar U.S. Core Bond Index

• 2008: -4%
• 2022: -12%

Fixed income is a different story than the stock market. Bond prices typically move in the opposite direction as stocks—when stocks are down. Bonds are up (or down by a lot less).

You add fixed income to your portfolio to provide ballast. And they largely performed this function in 2008, declining only 4%.

That’s not the case now. Thanks to sky-high inflation and rising interest rates, bonds have taken an epic beating in 2022. Eventually, higher yields could benefit bond investors, but that day is not now.

Real Estate Was Worse in 2008

Dow Jones U.S. Real Estate Index

• 2008: -43%
• 2022: -22%

Even given the impact of this year’s higher inflation, 2008 was far more difficult for real estate investors. The financial crisis of 2008 was ignited by a housing market crash compounded by inscrutable financial derivatives that few properly understood.

There’s no question that the real estate market is struggling thanks to rising interest rates and a challenging economic climate, with many businesses slow to return to downtown locations.

Still, today is nothing like 2008.

Gold Is Worse in 2022

Spot Gold Prices

• 2008: +3%
• 2022: -9%

In 2008, gold was a safe port in the storm when stocks cratered and the pessimists believed everything was going to hell.

No such luck in 2022, sadly. With stocks tanking and prices spiking, gold has been a big letdown as a safe-haven investment. This has sorely tested gold’s reputation as an inflation hedge.

Bonus Round: Crypto

Bitcoin has been an utter disaster in 2022, with BTC’s price down more than 60% this year.

Sure, cryptocurrency was just a twinkle in Satoshi Nakomoto’s eye in 2008—although the near collapse of the banking system that year was a major inspiration for his life’s work.

Which Year Was Worse for Investors: 2008 or 2022?

Judging by our highly unofficial scorecard above, 2022 has been worse for investors than 2008 (by a score of 3 to 2). One caveat to keep in mind is that each investor’s experience is different, and everything depends on your portfolio’s asset allocation.

That said, it’s impossible to ignore the broader context of both years.

There were periods in 2008 when it did feel like the entire financial system of the United States, if not the world, was ready to collapse. Meanwhile, the unemployment rate soared to levels not seen in generations and took nearly a decade to recover.

Related: How Long Do Recessions Last?

The housing crisis of 2007 and the long-lasting Great Recession were a two-headed economic malaise that scarred the country. According to the Federal Reserve, median household wealth remains lower than where it was leading up to 2008.

When viewed with this broader perspective in mind, investors had it worse in 2008. But 2022 isn’t over yet, and there’s been nothing but bad news so far this year. So buckle up, and let’s hope that 2022 ends better than it began.