2022 will be remembered as worst for global stock markets
2022.12.30 07:44
2022 will be remembered as worst for global stock markets
Budrigannews.com – 2022 has been perhaps the most turbulent year investors have ever experienced, and with good reason. Trillions of dollars have been wiped out of world stocks, bond markets have exploded, currencies and commodities have swung around, and a few crypto empires have collapsed.
Counting the final numbers is useful, but it doesn’t tell the whole story.
Although global equities are down $14 trillion and heading for their second-worst year ever, there have been nearly 300 interest rate hikes and three rallies of more than 10% during that time, which has made the volatility insane.
The war in Ukraine and widespread inflation as economies around the world emerged from the pandemic have been the primary drivers, but China has remained constrained by it.
In dollar terms, U.S. Treasuries and German bonds, the benchmarks of global borrowing markets and traditional go-to assets in difficult times, lost 16 percent and 24 percent, respectively.
Markets call DoubleLine Capital’s Jeffery Gundlach the “Bond King,” and he claims that conditions became so bad at times that his team was unable to trade for days at a time.
“There has been a purchaser’s strike,” he said. ” And this is understandable considering that prices have only recently decreased.”
As soon as it became clear that COVID was not going to shut down the global economy again and that the United States Federal Reserve, the most powerful central bank in the world, was serious about raising interest rates, the drama began.
In January alone, MSCI’s world stocks index lost 5% as ten-year Treasury yields increased to 1.8% from less than 1.5%.
That yield is now 3.68 percent, stock prices are down 20 percent, and oil prices surged 80 percent before being sold off. Despite stating that it was unlikely to change at this time last year, the Fed has increased rates by 400 basis points and the European Central Bank by a record 250 basis points.
Even though a last-minute Bank of Japan surprise this week gave the yen a lift, the dollar has gained almost 9% against the main currencies of the world and 12.5 percent against the Japanese yen.
Turkey’s inflation and monetary policy issues have hurt the lira by 28% in emerging markets, but its stock market is the best in the world.
Egypt, under pressure, devalued its currency by more than 36%. Ghana’s cedi plunged 60% as it defaulted along with Sri Lanka. Supported by Moscow’s capital controls, Russia’s rouble is still the second-best performing currency in the world, despite being significantly lower than its peak in June. Following the invasion of Ukraine, it was initially destroyed.
Robert Alster, Chief Investment Officer of Close Brothers Asset Management, said, “If you ask me what will happen next year, I really couldn’t tell you,” citing the pound and British bond markets’ downturn when Liz Truss’s short-lived government attempted an unfunded spending spree.
The pound lost 9% in a matter of days and ten-year gilt yields skyrocketed, both of which are uncommon in major markets.
Michael Hewson, a seasoned analyst at CMC Markets, stated, “Don’t be surprised if it goes down like a cup of cold sick if you sell it wrong.”
The tech giants have also lost $3.6 trillion as a result of the rise in rates. NASDAQ: Facebook likewise Tesla (NASDAQ:) have both drained over 60% while Letters in order (NASDAQ:) Amazon and Google (NASDAQ:) are both down 50% and 40%, respectively.
Despite signs that China’s zero-COVID policy is over, Chinese stocks have rallied late, but they are still down 25%, and emerging market “hard currency” government debt will suffer its first consecutive loss.
Except for the Middle East, initial public offerings and bond sales have also gone down, while commodities have been the best performing asset class for the second year in a row.
Although the war in Ukraine, which at one point raised prices by 140 percent, was largely to blame, the group with a rise of more than 50 percent is the best overall.
Worries about a recession and the West’s plan to stop buying Russian oil mean that it has lost all 80 percent of the money it made in the first quarter, along with wheat and corn.
Even more disorganized has been the cryptomarket. ends in 2022 without its mix of leveraged bets and cheap money.
Due to the collapse of Sam Bankman-Fried’s FTX empire, Celsius, and the alleged “stablecoins” terraUSD and Luna, the leading cryptocurrency has lost 60% of its value, and the overall cryptocurrency market has shrunk by $1.4 trillion.
Stefan Gerlach, former Deputy Governor of Ireland’s central bank and EFG Bank Chief Economist, stated, “What has gone in global markets this year has been traumatic.”
“But it wouldn’t have been so catastrophic if central banks hadn’t underestimated the rise in inflation so dramatically and had not had to jack up interest rates.”
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