Just when you thought you could bank on some S&P 500 stocks, the widening bear market is now dragging them down too.
Ten S&P 500 stocks that rose in the first five months of the year — including industrial giant Delta Air Lines, energy company Marathon Oil and communication services firm Paramount Global, are now down more than 23% this year.
Seeing some of the S&P 500 stocks that skated by the bear market now getting sucked in is a reminder of the importance of knowing how to play defense. That's especially true if the economy slips into, or is already in, a recession. Keep in mind that if you lose 20% on a stock, the stock must jump 25% just for you to get your money back.
"Recession fears are front and center again this morning, especially in Europe, as concerns of natural gas shortages heading into the winter months put the likelihood of recession as near certain, with the only question being how long and how deep," says Bespoke Investment Group.
S&P 500 Goes From Bad To Worse
If you're invested in the S&P 500, you know losses are widening. Sidestepping the pain, though, is getting tougher.
Just in the month of June, the S&P 500 dropped 8.6%. That's a painful loss if you consider the S&P 500 already plunged 13.1% from January through May. Investors have the dubious accomplishment of now living through the worst first six months of a year since 1970.
But some investors thought they found a way to sidestep the pain. Up until now, it wasn't that hard to avoid the selling. It turns out that 148 stocks in the S&P 500, including many value-price and high-dividend-paying stocks, actually rose from January through May. That safety trade, though, is ending real fast.
S&P 500 Energy Gets Dragged Down
All year, S&P 500 energy stocks thrived as the rest of the S&P 500 suffered. They're no longer getting spared, though.
Take a look at Marathon Oil, a Houston-based energy exploration and production company. Shares soared more than 91% in the first five months of the year. Investors loved the stock's low valuation, exposure to rising oil prices and current 1.4% yield. But in June, that started to sour. Shares dropped more than 30% just in June. The reason? If there's a recession, energy stocks tend to do poorly as the demand for oil cools. It's important to note that Marathon shares are still up 37% this year.
But the data shows that energy is no longer unmauled by the bear market. Of the 10 S&P 500 stocks to drop 23% or more in June, following a gain from January to May, four are energy firms. That's a larger representation than any other S&P 500 sector.
Airlines Crash Anew
Investors bought into the narrative of 2022 that people are rushing to travel again. That may be true, but airline stocks are still are getting scarred by the bear.
Shares of Delta Air Lines show the point as well as any. Shares rose nearly 7% in the first five months of the year. And that was despite paying no dividend. But the bottom fell out of the stock in June. Delta stock plunged more than 30% in a month. Now, shares of Delta are down more than 25% this year.
It's a similar story with entertainment company Paramount. The stock, formerly driven by 'meme stock' investors, jumped nearly 14% in the first five months of the year. It, too, was a dividend play (now yielding 3.8%). But just in the month of June, shares of Paramount tanked 28.1%. That leaves the stock down 18% on the year, more than wiping out the full year's dividend.
There are still ways to make money in the S&P 500. But as these "safe" stocks show, there's no guarantee of success.
These S&P 500 Winners Get Pulled Into Bear Market
All gained from January through May, but dropped 23% or more in June
| Company | Symbol | % change first 5 months | % change in June | Sector |
|---|---|---|---|---|
| Delta Air Lines | 6.7% | -30.5% | Industrials | |
| Marathon Oil | 91.4 | -28.5 | Energy | |
| Paramount Global | 13.8 | -28.1 | Communication Services | |
| Devon Energy | 70.0 | -26.4 | Energy | |
| APA | 74.8 | -25.8 | Energy | |
| United Airlines | 8.8 | -25.6 | Industrials | |
| Coterra Energy | 80.7 | -24.9 | Energy | |
| Mosaic | 59.5 | -24.6 | Materials | |
| Dow | 19.9 | -24.1 | Materials | |
| LyondellBasell Industries | 23.9 | -23.4 | Materials |
