- World stock markets fell 20% in the worst year since the financial crisis
- As rates rose, the bond market crashed
- Wild swings due to rate hikes and fights in gear and FX
- Crypto failures and advances have added to the volatility
LONDON, Dec 22 (Reuters) – Trillions of dollars in global stocks, bond market turmoil, currency and commodity whipsaws and the collapse of several crypto empires – 2022 could be the most turbulent year investors have ever seen, and for good reason.
Compiling the final numbers is useful but almost impossible.
Yes, global assets are down $14 trillion and heading for their second-worst year on record, but in that time there have been nearly 300 interest rate hikes and a third of the 10% increase that has fueled volatility during that time.
The main drivers were the war in Ukraine, with high inflation as global economies recovered from the pandemic, but China remained dependent on it.
US Treasuries and German Bonds, benchmarks of global debt markets and traditional assets in troubled times, lost 16% and 24%, respectively, in dollar terms.
DoubleLine Capital’s Jeffery Gundlach, known in the markets as the ‘Bond King’, says conditions on the bond have become so bad that his team has found it almost impossible to trade for days at a time.
“There is a strike by buyers. “And it’s understandable because prices have been so low lately.”
The drama started quickly when it became clear that the COVID will not hold the global economy again and the most influential central bank in the world, the Federal Reserve of the United States, was serious about increasing interest rates.
Ten-year Treasury yields rose from less than 1.5% to 1.8%, underperforming the MSCI world stock index by 5% in January alone.
That yield is now at 3.68%, stocks are down 20% while oil prices are up 80% before giving up. The Fed posted a 400 bps hike and the European Central Bank delivered a record 250 bps, despite saying this time last year that a rate hike was unlikely.
The dollar pushed the yen higher this week.
In emerging markets, inflation and problems with Turkey’s monetary policy cost the lira another 28%, but its stock market is the best performer in the world.
Hard-pressed Egypt devalued its currency by more than 36%. Ghana’s cedi has fallen 60 percent since it joined Sri Lanka. Despite falling far from its June highs, the Russian ruble is still the world’s second-best currency, backed by Moscow’s capital controls. It was initially destroyed after the invasion of Ukraine.
“If you ask me what’s going to happen next year, I really couldn’t tell you,” said Close Brothers Asset Management Chief Investment Officer Robert Alster, who, like many, also focused on pounding the pound and markets. British bonus when it was short. -Liz Truss’s life-long government floundered with unfunded spending.
Ten-year gilt yields rose over 100 bps and the pound lost 9% in a matter of days – moves that have little to do with major markets.
“If you sell it wrong, don’t be surprised if it goes down like a sick bowl,” said CMC Markets veteran analyst Michael Hewson.
The rate hike also took $3.6 trillion out of tech stocks. Facebook ( META.O ) and Tesla ( TSLA.O ) have both bled more than 60 percent, while Alphabet’s Google ( GOOGL.O ) and Amazon ( AMZN.O ) are down 40 and 50 percent, respectively.
Chinese stocks (.dMICN00000PUS) are still down 25% thanks to signs that the days of its zero-covid-19 policy are numbered and emerging market “hard money” government debt is set to suffer its first major losses . .
Initial public offering and bond sales are also down almost everywhere except the Middle East, while commodities are the best-performing asset class for the second year in a row.
Natural gas’s more than 50% rise is the best in that group, though largely due to the war in Ukraine, which at one point pushed prices up 140%.
Rising recession concerns along with the West’s plan to stop buying Russian oil meant Brent gave back the entire 80% it made in the first quarter, including wheat and corn.
The crypto market has become even more chaotic. Bitcoin steals its cheap cocktail and cheap bets by the end of 2022.
The leading cryptocurrency lost 60% of its value, while the broader crypto market fell by $1.4 trillion, due to the collapse of Sam Bankman-Fried’s FTX empire, Celsius and the supposed ‘sablecoins’ terraUSD and Luna.
“What has happened in global markets this year has been traumatic,” said EFG Bank Chief Economist and former Deputy Governor of the Central Bank of Ireland, Stefan Gerlach.
“But if central banks hadn’t underestimated the rise in inflation so dramatically and had to raise interest rates, it wouldn’t have been such a disaster.”
Reporting by Marc Jones, additional graphics by Vincent Flasseur and Pasit Kongkunakornku; Editing by Emelia Sithole-Matarise
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