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noInvestors are reeling from the worst year for global financial markets since the 2008 financial crisis, which prompted central banks around the world to raise interest rates and end a golden decade of cheap money for investors.
Global stocks have lost about a fifth of their value in the past year as an inflated “bubble of everything” during the Covid-19 pandemic sent tech stocks crashing and crypto assets plummeted.
As the economy reopened from pandemic lockdowns, inflation soared and Russia tightened gas supplies, sparking an energy crisis in Europe.
Then inflation hit the bond market, which fell to its first level in more than 70 years – in the wake of the UK’s miniscule budget hitting UK debt and undermining asset sales. Political turmoil has pushed the pound lower against the US dollar.
Investec economist Philip Shaw said: “2022 was really interesting.
Shares
In what Bloomberg called an “$18 trillion loss,” the MSCI All-Country World Stock Index 2016 By 2022, it had lost a fifth of its value. It is the worst performance in 14 years since the 2008 global financial crisis saw a 40 percent decline.
Europe’s STOXX 600 It is down 12% in 2022, its worst performance since 2018. But the UK’s FTSE 100 posted smaller gains, led by energy companies and defense firm BAE Systems.
China’s blue-chip CSI 300 index fell 22 percent in 2022 as Covid-19 lockdowns hit its economy.
According to the Bloomberg Billionaires Index, the market’s sales are expected to reach $1.4tn by 2022 of the wealth of the richest 500.
The fall in stocks as inflation rose, dampened hopes that the inflation would be temporary. US consumer inflation hit a four-decade high of 9.1 percent in June, and was stickier than expected in the fall.
Joe Biden has called inflation “the bane of our existence” as he decries food and gasoline prices. Since the 1990s, it has prompted the US Federal Reserve to increase at an extremely aggressive rate.
FAANGs in vain
Tech stocks have been hit particularly hard — the Nasdaq Composite’s It will lose a third of its value by 2022. The FAANGs – an acronym that stands for the Big Five tech companies, Meta (formerly Facebook), Amazon, Apple, Netflix and Alphabet (formerly known as Google) – were far from immune.
Apple is down 27 percent, Amazon’s share price has halved, and Facebook owner Meta is down 65 percent, as investors push Mark Zuckerberg’s $100 billion into Meta.
Tesla has lost two-thirds of its value by 2022, hitting a two-year low.
Tesla shares have struggled over the year, down nearly 40% in December, hit by fears of declining demand and CEO Elon Musk being distracted by a Twitter buyout.
“There is speculation that the sell-off is tied to mercurial CEO Elon Musk’s new Twitter acquisition, that Twitter is being sidelined by the auto company, to concerns over the growing threat of mistweets, and that Musk is being forced to sell his Tesla stake.” Matthew Weller, global head of research at CitiIndex, spoke on the margin call to support those who invested in the Twitter acquisition.
Bonds
In the year 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 Germany’s 10-year notes has suffered its biggest losses since the 1950s, according to Refinitiv data.
The end of September 2022 was the most destructive period for bonds since at least 1926, according to one estimate.
Investors with the classic “60/40” portfolio (60% in stocks and 40% in bonds) were experiencing their worst returns in a century this year, BofA Global Research warned in October.
The most important thing in the year is that the “era of easy money” is over and it’s over for good, said Ipek Ozkardeskaya, a senior analyst at the Swiss Quotation Bank.
“We didn’t know it at the time, but the 2022 bear market officially began a few days after the start of the year, the first minutes of the year were released, which showed that the Federal Reserve was not kidding about the rate hikes, and, according to Ozkardeskaya, the financial situation will become stronger throughout the year.
“And man, they’re getting tighter than we expected a year ago. The Fed has raised interest rates by 425 basis points since March,” she added.
Energy
Europe’s energy system is facing an unprecedented crisis, even if the price is reduced.
Continental gas prices jumped to 321 euros in August (compared to 27 euros a year ago), breaking new records after Gazprom announced the shutdown of the Nord Stream 1 pipeline to Germany for maintenance. The pipeline was shut down before it broke down in September.
Despite this disruption, Europe has been able to fill its gas storage facilities with the help of liquefied natural gas (LNG) flows. Benchmark European gas prices fell to their previous levels before the Ukraine invasion this week.
Oil posted its second annual gain in a row after a turbulent year. In March, Brent crude touched $139 a barrel, the highest level since 2008, as traders anticipated cuts in Russian supplies.
But crude prices fell back from that March peak, ending the year at $83 a barrel, amid concerns that the global economy is weakening, meaning lower demand from China, the world’s top crude importer.
“Concerns about weak global demand and a particular slowdown from China due to the Covid-19 lockdowns have pushed oil prices lower. The strength of the dollar this year has also put pressure on oil markets,” says Victoria Scolar, head of investment at Interactive Investor.
Goods
Copper is poised for its first annual decline since 2018, as prices have been weakened by a stronger dollar, fears of a global recession and the worsening Covid-19 situation in top consumer China. Other industrial metals on the London Metal Exchange were on track to fall for the year, ranging from 2% to 35%.
But London nickel prices have posted their biggest gain since 2009, jumping 45 percent by 2022.
Fears of a cut in nickel supplies from Russia led to chaotic trading in March. Prices doubled to more than 100,000 tonnes in a few hours, prompting the LME to suspend trading and cancel trades, prompting a lawsuit from New York hedge fund Elliott Management.
Less budget chaos
In the year It is also remembered that 2022 will be the year of a small budget crisis. Kwasi Kwarteng’s plans for unsponsored tax cuts rose to a low of $1.03 a share, and triggered a sell-off in government bonds.
The yield, or interest rate, on 30-year UK government debt rose from 3.5% to 5% after the mini-budget, with investors questioning whether the Leasing Trust can run a sustainable tax and spending policy.
This created a fire sale, whereby some pension funds were forced to offload billions of pounds of UK government bonds, or gilts, at depressed prices.
Some currencies nearly collapsed before the Bank of England pledged to buy bonds.
That intervention calmed the markets, but gilt yields have been rising, with the 30-year bond now yielding more than 3.9 percent.
The mini-budget was also a disaster for sterling and helped drive the US dollar higher for nearly 20 years, although the pound recovered and now trades at $1.20.
Crypto
In the year After peaking in November 2021, the cryptocurrency market has had a rough 2022 as central banks have raised interest rates and stopped the flow of cheap money.
Bitcoin has lost two-thirds of its value in the “crypto winter” grind, caused by the failure of a series of trading platforms, including cryptocurrency exchange FTX.
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