These are the worst starts to 2022, but there's a catch

The worst of this year is over, with stocks rallying as May draws to a close.

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It has been an awful start to 2022 by almost any measure. The S&P 500's 13% drop this year is its biggest since 1970, fueled by recession fears as the Federal ReserveFederal Reserve begins its most aggressive tightening of its monetary policy since 2000 to fight inflation. The Nasdaq 100 s 22% plunge ranking was the largest of its kind ever, as rising interest rates prevented the allure of technology and growth shares.

The selloff ended a two-year bull run in stocks that began in the depths of the Covid - 19 epidemic. The Fed officials, a resilient American consumer and upbeat corporate earnings have offered investors a ray of hope. The S&P 500 was up 2.5%, it's the longest weekly losing streak since 2001.

The Nasdaq 100 s dive from its November peak briefly eclipsed its March 2020 pandemic selloff, while the historic rally in tech shares is easing somewhat. Its nearly 30% drop was its worst since the gauge plunged more than 50% at the height of the global financial crisis. After Friday's rally, the index is 23% less than its Nov. 19 closing record.

Since 2008 investors have been whiplashed at a pace that hasn't been seen. According to Strategas Securities, the S&P 500 has moved in a daily range of 1% in 89% of the trading sessions in 2022.

After the war in Ukraine, a group bucking the trend has been the energy sector. Energy is the hottest cohort of the stock market, with a 58% gain this year.

Is capitulation near? There may be more head fakes before stocks hit a final low, according to analysts. The cheaper valuations have started to lure buyers back. The five previous worst starts to a year for the S&P 500 saw the index go higher for the rest of the year, rising on average 19.1% over the ensuing seven months, according to LPL Financial. One caveat, though: Stock market trading and investing have changed drastically since the 1970s, let alone the 1930s.

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