Inflation, tech slump and ‘crypto winter’: global stock markets in 2022 | stock markets

I amInvestors are reeling from the worst year in global financial markets since the 2008 financial crisis, when inflation forced central banks around the world to raise interest rates and end the supply of cheap money that fueled a golden decade for investors.

Global stocks have lost about a fifth of their value over the past year, as the “everything bubble” that inflated during the Covid-19 pandemic sent tech stocks and crypto assets plummeting.

Inflation rose as economies reopened from pandemic lockdowns and Russia triggered an energy crisis in Europe by weaponizing gas supplies.

Inflation then hit the bond market, which fell into its first spiral in more than 70 years – with the turmoil after Britain’s mini-budget hitting British debt and weakening asset sales. Political turmoil also sent the pound to record lows against the US dollar.

“2022 has certainly been eventful,” says Investec economist Philip Shaw.

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The MSCI All-Country global stock index has lost about a fifth of its value over the course of 2022, in what Bloomberg calls an “$18 billion trajectory.” That’s the worst performance in 14 years, since the global financial crisis wiped 40% off stock values ​​in 2008.

Europe’s STOXX 600 fell about 12 percent in 2022, its worst performance since 2018. But Britain’s FTSE 100 posted a small gain, lifted by energy companies and defense firm BAE Systems.

China’s blue-chip CSI 300 is down 22% in 2022 as Covid-19 lockdowns hit its economy throughout the year.

The market selloff wiped nearly $1.4 billion from the fortunes of the 500 richest in 2022, according to the Bloomberg Billionaires Index.

Stocks tumbled as inflation soared, crushing hopes that price rises would be temporary. US consumer price inflation hit a four-decade high of 9.1% in June, and proved stickier than expected in the fall as well.

Joe Biden called inflation “the bane of our existence,” as food and gas prices soared. This led the US Federal Reserve to its most aggressive rate hikes since the 1990s.

FAANGs for nothing

Tech stocks have been hit particularly hard – the Nasdaq Composite has lost a third of its value in 2022. The FAANGs – an acronym that refers to the Big Five tech companies, Meta (formerly Facebook), Amazon, Apple, Netflix and Alphabet (formerly Google) – have been far from are immune

Apple fell 27%, Amazon’s share price halved, while Facebook owner Meta fell 65% as investors balked at Mark Zuckerberg’s $100 billion push into the meta-bears.

Tesla also lost about two-thirds of its value in 2022, hitting a two-year low.

Tesla’s shares had a rough end to the year, losing nearly 40% in December, hurt by fears of slowing demand and fears that CEO Elon Musk is distracted from buying Twitter.

“Speculation abounds that the sale is related to Mercurial CEO Elon Musk’s new purchase of Twitter, from whether Twitter is just distracting him from his car company, to concerns about his increasingly raucous tweets, to concerns that Musk might be forced to sell his Tesla stake. on the sidelines to support whoever held the Twitter acquisition,” says Matthew Weller, global head of research at City Index.

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2022 was a historically bad year for European sovereign debt, hurt by interest rate hikes by the European Central Bank and the US Federal Reserve.

The interest rate, or yield, on 10-year German bunds saw its biggest selloff back in the 1950s, according to Refinitiv data.

Until the end of September 2022 was the most destructive period for bonds since at least 1926, according to one estimate.

Investors with classic “60/40” portfolios (60% in stocks and 40% in bonds) faced the worst returns this year in a century, BofA Global Research warned in October.

The most important view of the year is that the “era of easy money” is over and over for good, says Ipek Ozkardskaya, senior analyst at Swissquote Bank.

“We didn’t know it at the time, but the bear market of 2022 officially started just a few days after the year began, when the publication of the first minutes of the year showed that the Federal Reserve was not joking about the interest rate hikes, and that financial conditions would tighten a lot during the year,” says Ozkardskaya.

“And man, they’ve tightened … a lot tighter than we expected a year ago, when the Fed raised its interest rate by 425 basis points starting in March,” she adds.

energy

Europe’s energy system is facing an unprecedented crisis, even as prices have cooled from their peaks.

Continental gas prices broke new records in August, jumping to €321 per megawatt-hour (compared to €27 a year earlier), after Gazprom announced the closure of its Nord Stream 1 pipeline to Germany for maintenance. After that, the pipeline remained closed, before it was released in September.

Despite the disruption, Europe managed to fill its gas storage facilities, aided by an influx of liquefied natural gas (LNG). This week, European gas prices fell back to levels last seen before the invasion of Ukraine.

Oil recorded a second annual increase in a row, after a turbulent year. In March, Brent crude oil hit its highest point since 2008, reaching $139 a barrel, as traders anticipated a disruption in Russian supplies.

But oil prices then fell from that peak in March, ending the year at around $83 per barrel, amid concerns that the global economy was weakening, meaning lower demand from the world’s top oil importer, China.

“Concerns about weaker global demand and some slowdown from China given the aggressive Covid lockdowns have pushed oil prices lower. The strength of the dollar this year has also put pressure on oil markets,” says Victoria Schooler, head of investments at Interactive Instore.

goods

Copper posted its first annual decline since 2018, as prices were pushed by a stronger dollar, fears of a global recession and a worsening Covid-19 situation in top consumer China. Other industrial metals on the London Metal Exchange were on track for annual falls of between 2% and 35%.

But nickel prices in London posted their biggest gains since 2009, jumping 45% during 2022.

Concerns about a disruption in nickel supplies from Russia caused chaotic trading in March. Prices doubled to more than $100,000 a tonne within hours, prompting the LME to suspend trading and cancel trades, which then drew a lawsuit from New York hedge fund Elliott Management.

Mini-budget chaos

2022 will also be remembered as the year of the mini-budget crisis. Kwasi Kuarteng’s plans for unfunded tax cuts have sent sterling cratering to record lows of around $1.03, prompting a risky sell-off in government bonds.

The yield, or interest rate, on Britain’s 30-year government debt jumped from 3.5% to more than 5% after the mini-budget, as investors sold those funds, questioning whether Liz Truss’ administration would be able to manage sustainable tax and spending policies .

This created a fire sale, in which some pension funds were forced to offload billions of pounds of UK government bonds, or bonds, at distressed prices.

Some of the funds came close to collapse before the Bank of England stepped in with a commitment to buy bonds.

That intervention calmed markets, but gilt yields are creeping higher, with 30-year bonds now yielding more than 3.9%.

The mini-budget was also a disaster for sterling, and it helped push the US dollar to its highest level in 20 years, although the pound has recovered and is now trading around $1.20.

Crypto

After peaking in November 2021, the cryptocurrency market had a rough 2022 as central bankers raised interest rates and ended the flow of cheap money.

Bitcoin has lost two-thirds of its value, in a grinding “crypto winter” in which a series of trading platforms have failed, including the cryptocurrency exchange FTX.