2022 shocked world markets: they are heading for their worst year since the financial crisis

Yes, global equities have lost $14 trillion and are heading for their second worst year on record, But in that time there have been nearly 300 interest rate hikes and a trio of rallies of more than 10%, making for monstrous volatility.

The main drivers have been the Ukraine war, combined with runaway inflation as world economies emerged from the pandemic, while China maintained its strict COVID-19 restrictions.

US Treasury Bonds and German Bondsbenchmarks for global debt and asset markets that have traditionally been used in difficult times, they lost 16% and 24%, respectively, in dollar terms.

Jeffery Gundlach of DoubleLine Capital, dubbed the “king of bonds” in the markets, says that conditions became so bad at times that his team found it nearly impossible to operate for days on end. “There has been a buyers’ strike”, said. “And it’s understandable, because prices have only gone down until recently.”

The drama broke out as soon as it became clear that COVID was not going to paralyze the world economy again and that the most influential central bank in the world, The US Federal Reserve was serious about raising interest rates.

The yield on the 10-year Treasury jumped to 1.8% from less than 1.5%, marking a 5% drop for the MSCI index of world stocks in January alone.

That yield is now at 3.68%, shares are down 20% while oil prices rose 80% before wiping out all their gains. The Fed has raised its rates by 400 basis points and the European Central Bank has done so by a record 250 basis points.

The dollar rose almost 9% against the main world currencies, and 12.5% ​​against the Japanese yeneven after a surprise Bank of Japan decision this week boosted the Japanese currency.

“If you ask me what will happen next year, I really couldn’t tell you.” said Robert Alster, chief investment officer at Close Brothers Asset Management, who, like many, also he pointed to the plunge in sterling and UK bond markets when the short-lived government of Liz Truss announced an increase in unfunded spending.

Yields on 10-year gilts soared more than 100 basis points and the pound lost 9% in a matter of days, moves of a magnitude unusual for large markets.

Global markets: problems for technology companies

The rate hike has also taken $3.6 trillion off the tech titans. Facebook and Tesla have hemorrhaged more than 60%, while Google -of Alphabet- and Amazon have fallen by 40% and 50%, respectively.

Chinese stocks have staged a late rally on signs that its zero-COVID policy has its days numbered, but still They accumulate a 25% drop and emerging market government debt in “hard currency” will record its first consecutive loss.

Initial public offerings and bond sales have also plunged almost everywhere except the Middle East, while Commodities have been the best performing asset class for the second year in a row.

The rise of more than 50% of natural gas is the best of the entire group, although it is largely due to the war in the Ukraine, which He even raised prices by 140%.

Growing recession concerns, coupled with the West’s plan to stop buying Russian oil, have caused Brent to erase gains of 80% it posted in the first quarter, as have wheat and corn.

“What has happened this year in world markets has been traumatic,” said Stefan Gerlach, chief economist at EFG Bank and former deputy governor of the central bank of Ireland.

“But if central banks Hadn’t they so drastically underestimated the rise in inflation and had to raise interest rates so much, it wouldn’t have been so catastrophic,” he warned.

Global Markets: Cryptocurrency Crash

The cryptocurrency market was even more chaotic. Bitcoin ends 2022 stripped of its cocktail of cheap money and leveraged gambling.

The main cryptocurrency has lost 60% of its value, while the cryptocurrency market in general It’s down $1.4 trillion, crushed by the collapse of Sam Bankman-Fried’s cryptocurrency exchange FTX, Celsius, and so-called “crypto stablecoins” TerraUSD and Luna.