This is how 2022 went by: dollar storm, cryptocurrency fall, volatility of raw materials…
As the world enters 2023, investors are leaving a difficult year behind them. 2022 has been one of the most turbulent years investors around the world have seen. Trillions of dollars in stock losses, bond market fluctuations, currency and commodity volatility, and the collapse of cryptocurrencies hit markets this year.
In 2022, global stocks fell $14 trillion and stock markets had one of their worst years. Strong interest rate hikes by central banks and strong volatility left their mark on stock markets this year.
EVENTS THAT MADE MARKETS THIS YEAR
Inflation, the energy crisis and the war in Ukraine, started this year by the exit of the global economies from the pandemic, were the focus of the markets. In addition, the markets closely followed the consequences of the ongoing epidemic in China.
The problems started this year with the realization that Covid would not shut down the global economy again, and they increased with the realization that the US Federal Reserve was serious about raising interest rates. During the year, the Fed raised interest rates by 400 basis points and the European Central Bank (ECB) raised interest rates by 250 basis points.
dollar storm
The dollar index, which measures the dollar against major world currencies, rose 9 percent during this time. The dollar was also up 12.5% against the Japanese yen.
In emerging markets, one of the hardest hit currencies was the Turkish lira. With the problems created by inflation and Turkey’s monetary policy, TL lost its value by 28.6 percent. On the other hand, Borsa İstanbul was the best performing stock market in the world.
Currencies against the US dollar, year-to-date change. Chart: Reuters
The Egyptian pound has devalued 36 percent this year. The Russian ruble, which began the year with a collapse with the war in Ukraine, also became one of the world’s best-performing currencies this year, despite falling from its highs in June.
THE PRODUCTS ARE HARD
Commodities were also the instruments that fluctuated the most due to financial fluctuations, geopolitical crises and production problems. The increase in the prices of the Dutch TTF, which is the reference price for European natural gas, reached 140 percent during the year. However, due to the strong market fluctuation after natural gas, it gave back some of the gains.
Brent oil, which started the year at the $75 level, hit $120 for the year with the problems created by the Ukraine war. Oil later reversed these gains and was trading around $85 towards the end of the year. Wheat and corn prices also fluctuated considerably.
STAR CRYPTO MARKET
The biggest financial chaos in 2022 has undoubtedly occurred in crypto. Bitcoin, which broke a record in 2021 with the effect of loose monetary policy and leveraged transactions, almost collapsed this year with the big problems in the cryptocurrency market and the tightening measures of central banks.
While the top cryptocurrency lost 60 percent of its value over the year, the cryptocurrency market shrank by a total of $1.4 trillion. The collapse of Sam Bankman-Fried’s FTX empire, Celsius and Luna during the year were the main causes of this storm.
‘IT WAS A TRAUMATIC YEAR’
“If you ask me what’s going to happen next year, I can’t really tell you,” Robert Alster, chief investment officer at Close Brothers Asset Management, was quoted as saying by Reuters.
Stefan Gerlach, Chief Economist at EFG Bank and former Deputy Governor of the Central Bank of Ireland, said: “What happened in global markets this year has been traumatic. “But it wouldn’t have been so catastrophic if central banks hadn’t taken rising inflation so lightly,” he said.