Trillions of dollars wiped off world stocks, bond market tantrums, whip-sawing currency and commodities and the collapse of a few crypto empires – 2022 has been perhaps the most turbulent year investors have ever seen, and for good reason.
Tallying the final numbers is useful but doesn t even come close to telling the whole story.
Yes, global equities are down $14 trillion and heading for their second worst year on record, but there have been nearly 300 interest rate hikes and a trio of 10%-plus rallies in that time making the volatility freakish.
The main drivers have been the war in Ukraine, combined with rampant inflation as global economies broke out of the pandemic, but China remained shackled by it.
US Treasuries and German bonds, the benchmarks of global borrowing markets and traditional go-to assets in troubled times, lost 17% and 25% respectively in dollar terms.
DoubleLine Capital s Jeffery Gundlach, dubbed the Bond King in the markets, says conditions got so ugly at points that his team found it almost impossible to trade for days at a time.
Read more: Wall Street ends 2022 with biggest annual drop since 2008
“There has been a buyer s strike,” he said. “And understandably so, because prices have just been going down until recently.”
The drama kicked in as soon as the year kicked off, as it became clear that COVID was not going to shutter the global economy again and the world s most influential central bank, the U.S. Federal Reserve, was serious about raising interest rates.
Ten-year Treasury yields jumped to 1.8% from less than 1.5%, knocking 5% off MSCI s world stocks index (.MIWD00000PUS) in January alone.
Fast forward and that yield is now at 3.8%, stocks are down almost 20% and oil ends the year 8% higher, having been up nearly 80% back in early March. The Fed has delivered an eye-watering 400bps of rate hikes and the European Central Bank, a record 250bps, despite saying this time last year it was unlikely to budge.
