Market X-ray - find out which areas are getting hit the hardest.

Global Stock Market Indices 

The market X-ray shows that US large cap stocks, and especially tech stocks, continue to lead the market lower. The 7 biggest stocks in the S&P 500 are tech names, and they account for 27% of the entire loss for the index.

Small caps are also struggling this year, while mid caps are ahead of the broader market. 

Non-US stocks are outperforming their US counterparts, but that may change if the sanctions against Russia begin to weaken their economies.

Not surprisingly, bonds are holding up well as investors seek the safety that they provide. Bonds had a strong rally on Friday. I expect bonds to remain a place of shelter from the storm for the next few months.

Emerging Markets are on top this year, after good results in 2019 and 2020. Will they continue their momentum in 2022? I think they will, as long as China gets back on a high growth track.

All of the return data in this article is from Morningstar.

Global Asset Classes

Commodities are the most favored asset class this year, up 14.9% after gaining 38.3% last year. Energy stocks have been leading this asset class higher.  US REITs had a good 2021, but they are well under water in 2022.

As expected, bonds - foreign and domestic - are well represented on the asset class leader board. When adjusted for inflation, however, real yields are negative almost everywhere you look, and inflation will likely get worse.

Stock Market Sectors

Energy is clearly where the action is this year, up 26.3% after gaining 59.6% last year. Financials are benefitting from higher rates, but Friday's drop in yields will take some of the shine off of this sector. Financials were up 34.6% last year. 

Consumer Discretionary stocks are the worst performing sector this year, down 13%. Consumer Staples and Utilities are outperforming as investors continue to focus on safe, steady areas of the market.

Stock Market Factors

The market X-ray shows that Value stocks are the place to be this year. They were up 38.9% last year. 

Money is flowing out of quality stocks this year, and much of it is going into Value names. Momentum stocks are struggling as investors look to sell and lock in gains while the market heads south.

Commodities

After spending years at the bottom of the tables, Natural Gas, Gasoline, and Crude Oil now lead the pack. Gold and Silver are having a good year, based on the flight-to-safety trade. 

Foreign Markets

Brazil is the big winner this year, up 17.2%. The UK is in 2nd place, but new pressure from Russia sanctions could dim their prospects.

No surprise that Russia is the worst performing market this year, down 59.4%. Eurozone countries are getting hit hard by the anticipated damage that heavy sanctions will bring to the region. My top country pick for next year is Japan.

Momentum stocks

These stocks are showing strong momentum for 1 month, 3 months, and year-to-date periods. This is a small sample of where the money is going now. 

It's not a surprise to see HAL, an energy play, at the top of the momentum list. In fact, all of these winners (except MOS) are involved in the energy business. (I limited my search to just the S&P 500.)

Stock Styles

The market X-ray shows that Value is king, at least for now. Mid-cap value stocks are leading the style race this year. Surprisingly, Small-cap value is outperforming the S&P 500, in spite of the poor performance of small caps in general.

Growth is in last place - large, small, and mid caps.

Final thoughts

I think global stock markets will continue to struggle until there is some signs of a resolution to the Russia-Ukraine war. Investors hate uncertainty, and a war brings plenty of it. That won't change until Putin either leaves Ukraine, or declares victory as the rest of the world stands by and lets him..

I believe that gains for the rest of this year will be harder to come by.  I don't anticipate a negative year, but I would be surprised if the market gained 10% or more in 2022.

The FED still calls the tune for the equity market, and investors largely believe that they will not allow a bear market to spoil the party. However, Russia sanctions are such a huge wild card that anything can happen. 

Regarding the stock market, watch for more lower lows, followed by failed attempts to make a new high. The dip-buyers have lost their mojo, but they have shown great resilience in the past when thinks were looking bleak. We can't count them out entirely.