Investors found few, if any, safe havens in 2022 as central banks in the US and around the world raised interest rates for the first time in years to combat rising inflation, fueling fear of a global recession.
The video above is from a previous report: Stock Market Plunges As Federal Reserve Signals It Will Stay Aggressive To Control Inflation
Consumers paid more for energy, food, and just about everything else. Loans to buy a house or a car have also become more expensive.
On Wall Street, the benchmark SThe &P 500 Index fell into a bear market as it fell more than 20% from the all-time high set in early January. The energy sector was the only winner, while technology stocks tumbled.
A rout in the bond market was a particularly painful turn for fixed income investors. Investors in cryptocurrencies were not spared either.
– Alex Veiga
Here’s a look back at the key events in the markets for 2022:
INFLATION AND THE FED
Central banks’ response to inflation outshone financial markets in 2022 and could very well do so again next year. The Federal Reserve began raising rates in March and would eventually raise them seven times for a total of 4.25 percentage points.
By the end of the year, there were hopeful signs of inflation as property prices fell and rents began to fall. But harsh remarks from the Fed in December detracted from a fourth-quarter rally in stocks.
THE BEAR ROARS
Wall Street’s brutal year left few stocks unscathed, with the vast majority falling into a bear market under the weight of rapidly rising interest rates.
After peaking on the first trading day of 2022, the S took about six months.&P 500 to fall more than 20%. The biggest losers were the stocks that had outperformed in the rally that followed the coronavirus crash. Seven out of 10 stocks in the S&P 500 fell in 2022, as of December 21.
BOND MARKET BLUE
It was one of the worst years for bond investors.
Decades of high inflation meant that the fixed payments from future bonds won’t buy as many groceries, gallons of gas, or anything else that’s rising in price. The Fed’s decision to raise interest rates also hit bond prices.
Historically, bonds have held up better than stocks during economic downturns, offering some protection to investors, but both crashed in 2022.
FALLS IN THE HOUSING MARKET
As 2022 began, the average rate on a 30-year mortgage was just over 3%, near all-time lows. By October, the average rate on that 30-year home loan had soared above 7%, a 20-year high.
Higher mortgage rates combined with still-rising home prices make it difficult for many prospective buyers to afford a home. Sales of previously occupied US homes experienced their biggest drop in more than a decade.
– Alex Veiga
IS TESLA ON AUTOMATIC PILOT?
Tesla shareholders cannot be blamed for feeling abandoned. With CEO Elon Musk’s focus sidetracked by his Twitter takeover, Tesla’s stock has lost more than half its value.
Most of Musk’s wealth is tied up in Tesla shares, which began to slide in April when he disclosed a stake on Twitter. The stock price plunge put Musk in second place on Forbes’ list of the world’s richest people, behind Bernard Arnault, chairman of luxury goods maker LVMH.
CONSUMERS FEEL THE PINCHE
The highest inflation in four decades is hitting consumers squarely in their wallets.
Homes facing higher prices are likely depleting savings accumulated during the pandemic. Wages rose, although not at the same rate as inflation. Credit card debt skyrocketed and rents went up.
Aggressive rate hikes by the Fed have pushed up the cost of borrowing. But while the average rate on a credit card rose to 16.3% in August, according to the government, the average rate on a savings account is still just 0.2%.
IMPACT OF THE UKRAINE WAR
The Russian invasion of Ukraine in February sent prices skyrocketing for the commodities the world feeds on: oil, natural gas and wheat.
European natural gas prices rose to 17 times their prewar levels after Russia cut off most supplies during the war. Global oil prices soared as Western buyers shunned Moscow crude, pushing Brent above $120 a barrel in May. Record wheat prices caused disastrous food inflation in poor countries.
By the end of the year, oil had fallen back to around $80. American drivers saw some much-needed relief from high gasoline prices.
CHINA ABANDONS ZERO COVID
China’s economic growth and stock market fell in 2022 under pressure from pandemic controls and corporate debt.
The world’s second-largest economy contracted 2.6% in the three months ending in June compared with the previous quarter after Shanghai and other industrial hubs shut down to combat outbreaks. Forecasters say annual growth could fall below 3%, among the lowest in decades.
In response, the ruling Communist Party lifted disease restrictions and tried to revive the struggling real estate industry.
THE WILD RIDE OF CRYPTO
The year started with bitcoins above $45,000 and the cryptocurrency industry made new inroads among politicians and major financial institutions. As 2022 winds down, bitcoin is below $17,000 and the industry is reeling from another crisis.
FTX, the second-largest cryptocurrency exchange, crashed in November after questions about its financial strength led clients to request large withdrawals. He filed for bankruptcy on November 11. Founder Sam Bankman-Fried was arrested in the Bahamas and faces criminal charges in the US.
THE STREAMING WARS
Netflix, Warner Bros. Discovery and other big entertainment companies slumped in 2022 as streaming services struggled amid increased competition and rising inflation clamped down on ad spending.
Consumers who had been in lockdown during the pandemic came out and turned off their streaming services. The sheer number of streaming options also left companies in a fierce fight for viewers’ attention.
– Damian Troise
Copyright © 2022 by The Associated Press. All rights reserved.