MeInvestors are reeling from the worst year in global financial markets since the 2008 financial crisis. Inflation has forced central banks around the world to raise rates, ending the supply of cheap money that has fueled his golden decade for investors.
Global stocks lost about a fifth of their value last year as “all the bubbles” that inflated during the Covid-19 pandemic burst and tech stocks and cryptocurrencies crashed.
Inflation surged as economies reopened from pandemic lockdowns and Russia weaponized gas supplies to trigger an energy crisis in Europe.
Then inflation hit the bond market, sending it into its first bear market in over 70 years. It was a turmoil after a small UK budget weighed on UK debt and undermined property sales. Political turmoil has pushed the pound to record lows against the US dollar.
“2022 has certainly been an eventful year,” says Investec economist Philip Shaw.
The MSCI All Country World Index has lost about one-fifth of its value during 2022. This is what Bloomberg calls the “$18 Trillion Crash.” That’s the worst performance in 14 years since the global financial crisis in 2008, when stocks fell 40%.
Europe’s STOXX 600 is down about 12% in 2022, its worst performance since 2018. However, the UK’s FTSE 100 posted a slight gain, lifted by energy company and defense firm BAE Systems.
The CSI 300 index of China’s best performing companies is down 22% in 2022. This is because the Covid-19 lockdown has hit the Chinese economy throughout his year.
The 500 richest people alone lost about $1.4 trillion in 2022 due to market crashes, according to Bloomberg’s Billionaires Index.
Stocks plummeted as inflation surged, dashing hopes that the price gains would be temporary. US consumer price inflation was stronger than expected in the fall as he hit 9.1% in June, his highest in 40 years.
Joe Biden called inflation “the bane of our existence” as food and gasoline prices surged. I was.
FAANG for free
Technology stocks have been particularly hard hit – Nasdaq Composite has lost a third of its value in 2022. Google) – It was far from immune.
Apple is down 27%, Amazon’s stock has halved, and Facebook owner Meta is down 65%. Investors rebounded from Mark Zuckerberg’s $100 billion push into the metaverse.
Tesla will also lose about two-thirds of its value in 2022, hitting a two-year low.
Tesla shares fell nearly 40% in December, hit by fears of slowing demand and fears that CEO Elon Musk may be distracted by the Twitter acquisition. , marked the rough end of the year in December.
“There has been speculation that the sale is related to the wayward CEO Elon Musk’s new acquisition of Twitter. Speculation has ranged from concerns over his increasingly erratic tweets to fears that Musk may be forced to sell his stake in Tesla. ,” said Matthew Weller, head of global research at City Index.
2022 has been a historically bad year for European sovereign debt due to interest rate hikes by the European Central Bank and the US Federal Reserve.
Germany’s 10-year bond rate, or yield, suffered its biggest drop since the 1950s, according to Refinitiv data.
By one estimate, the end of September 2022 was the most devastating period for bonds since at least 1926.
Investors with classic 60/40 portfolios (60% equities, 40% bonds) are facing the worst returns in a century this year, BofA Global Research warned in October.
Ipek Ozkardeskaya, a senior analyst at Swissquote Bank, said the most important observation of the year was that the “easy money era” was over and gone for good.
“I didn’t know it then, but the 2022 bear market has officially kicked off just days after the year began. We have shown that we are not saying that the financial situation will get tougher year by year,” says Ozkardeskaya.
“And they tightened … much tighter than we expected a year ago, with the Fed raising interest rates by 425 basis points from March,” she added.
Europe’s energy system is facing an unprecedented crisis despite prices cooling off from highs.
Continental gas prices soared to a new record of €321 per MWh in August, up from €27 a year earlier, after Gazprom announced it would close the Nord Stream 1 pipeline to Germany for maintenance. The pipeline has since remained closed, but was sabotaged in September.
Despite the turmoil, Europe was able to fill its gas storage facilities, aided by an influx of liquefied natural gas (LNG). European benchmark gas prices fell to pre-Ukraine levels this week.
Crude oil posted its second consecutive annual gain after a tumultuous year. Brent crude reached its highest level since 2008 in March, reaching $139 a barrel as traders expected disruptions in Russian supplies.
But then oil prices fell from their March peak, ending at around $83 a barrel on concerns of a weakening global economy.
“Weaker global demand and aggressive COVID-19 lockdowns have pushed oil prices lower due to concerns about a particular slowdown from China. ,” said Victoria Scholar, director of investment at Interactive Investor.
Copper heads for its first annual drop since 2018 as prices were pushed down by a stronger dollar, fears of a global recession and worsening Covid-19 conditions in China, the biggest consumer I was. Other industrial metals on the London Metal Exchange tend to fall between 2% and 35% per annum.
However, nickel prices in London have recorded their highest rise since 2009, jumping 45% in 2022.
Concerns over disruptions to nickel supplies from Russia sparked chaotic trading in March. The price doubled to over $100,000 per ton within hours and the LME stopped trading and voided the deal. This prompted New York hedge fund Elliott Management to file a lawsuit.
mini budget mess
2022 will also be remembered as the year of the mini-budget crisis. Kwasi Kwarteng’s plans for an unfunded tax cut sent the pound plummeting to a record low of around $1.03, sparking a dangerous sell-off of government bonds.
Yields on 30-year UK government bonds, or interest rates, drop from 3.5% to 5% after mini-budget as investors sell these gold coins questioning whether the Liz Truss government can implement sustainable tax and spending policies increased by more than 10%.
This sparked a fire sale in which some pension funds were forced to sell off billions of pounds of British government bonds, or gold coins, at bad prices.
Some funds nearly collapsed before the Bank of England committed to buy bonds.
While the intervention has calmed the market, gold yields have been creeping higher, with 30-year yields now above 3.9%.
The mini-budget was also a disaster for the pound, helping to push the US dollar to its highest level in 20 years, but the pound has recovered and is now trading around $1.20.
After peaking in November 2021, the cryptocurrency market is in dire straits in 2022 as central banks raise interest rates and end the flow of cheap money.
Bitcoin lost two-thirds of its value in a “crypto winter” that saw a series of trading platforms fail, including crypto exchange FTX.