An endangered animal: the bull of Wall Street (Photo: ShutterStock)
Bearish or not bearish - the capital market is bleeding, billions are being wiped out, tech stocks are plummeting, cryptocurrencies are crashing and more: 2022 was a year of drama in the financial markets.
The corona epidemic that refuses to go away, inflation, the war in Ukraine, an energy crisis, disruptions in supply chains that are still ongoing, a drop in American consumer confidence, interest rate hikes, faltering wages, falling stocks and unrealized profit forecasts - all of these were reflected in economic reality this year.
It was a challenging year, to say the least, where you didn't have to be a big businessman to lose money.
There is no citizen who did not "bleed" through his pension funds, deposits - or from the second past, through the "minus" in the bank or the mortgage that became expensive.
And after summarizing the mindset in a few sentences, we will embark on a journey between the stations where the global economy stopped in 2022.
They have already forgotten when they saw a bull
The S&P 500 index,
which entered bearish territory this year, faithfully reflected the state of the energy sector, due to a decrease in the supply of energy products due to the war in Ukraine.
Large and small stocks have also suffered this year, and contrary to popular belief that bond prices usually do better in tough conditions, they too have fallen this year due to increasingly high interest rates.
According to the Wall Street Journal, the 10-year US government bond recorded the worst performance in 234 years.
As a result, the traditional 60/40 stock/bond portfolio split did not soften the decline.
November also saw the collapse of several large tech stocks that have lost a combined $3.4 trillion in market value since the start of 2022 — including a $1 trillion drop in one week. Stocks The "faang" - Facebook, Amazon, Apple, Netflix and Google have fallen sharply due to inflation and interest rate hikes.
Facebook, for example, fell 26% in one day in February and its market value fell by more than $230 billion, which is now considered the largest write-off in the history of the stock market.
Meta, which was worth more than a trillion dollars last year, is currently worth only about $327 billion.
S&P 500 index (photo: official website, official website)
This year also saw several bubbles burst: the crypto and NFT bubble collapsed due to changes in the prioritization of risk over speculation.
Stocks that enjoyed an inflated setup and excessive demand experienced a painful correction. And as if to sum up the terrible year on a particularly jarring note, the FTX crypto exchange went bankrupt in November.
FTX collapsed in early November after the publication of a report by the CoinDesk exchange, which revealed that the company's founder and CEO Formerly, Sam Bankman-Fried, secretly transferred $10 billion of his clients' money at FTX to another company of his called Almeda Research - and that much of that amount disappeared.
After an influx of investors rushing to withdraw their money, FTX filed for bankruptcy protection in Nov. 11, after its value plummeted from $32 billion to bankruptcy in a matter of days. Bankman-Fried's net worth, estimated at $16 billion, plummeted to almost zero, and he stepped down as CEO.
On December 12, 30-year-old Bankman-Fried was arrested in the Bahamas on suspicion of fraud.
The collapse of one of the world's largest crypto exchanges has shaken the market.
Crypto stocks lost two-thirds of their value, while the total crypto market cap plunged below $1 trillion.
Customers and investors have lost billions of dollars, and will likely never see the money, according to the new CEO of FTX.
According to United States Attorney General Damian Williams, this is one of the biggest financial crimes in American history. John Ray, the CEO The new court appointee to FTX said in a congressional hearing that "it was an old-style fraud."
Bankman-Fried was charged with eight counts, including securities fraud and money laundering. He was released on bail of 250 billion dollars - the largest in history.
He wanted to buy Twitter, regretted it - and discovered that the proverbial concept of "no regrets" is also valid in the business world.
Elon Musk (Photo: GettyImages, Win McNamee)
The most expensive tweet in history - Elon Musk bought Twitter
The world's second-richest person said in early 2022 that he wanted to buy one of the world's most popular social media platforms — then changed his mind.
And again he changed his mind.
Then announced that he wanted to purchase Twitter.
The saga began in January, when Elon Musk began investing in Twitter, which has 230 million users.
In April, the purchase deal was signed, but in the weeks that followed, Musk raised concerns about spam accounts on the platform and claimed that Twitter had provided him with an inaccurate estimate of their number.
In May, Musk said the deal was temporarily "on hold" over the issue, and some argued that it was just an excuse the billionaire entrepreneur was using to pull back amid the plunge in capital markets, particularly in the technology sector.
In July, Twitter shares fell 11% after Musk said he was canceling the deal.
On October 21, the stock fell 5% to $49.88 after reports of a federal investigation into the acquisition deal.
On October 28, Elon Musk completed the deal worth $44 billion, or $54.20 per share.
In the days after the purchase, Musk fired the company's senior managers and half of the staff (7,500 people), established a content monitoring committee and changed Twitter's subscription service so that it would cost $8 a month for those interested.
On December 13, the market research company Insider Intelligence published a forecast, according to which more than 30 million users will leave Twitter in the next two years, due to concerns about the spread of false and offensive information following the acquisition.
Monthly users are expected to fall 4% in 2023 and 5% in 2024 — more than 32 million in total — the first annual declines in user numbers since Insider Intelligence began monitoring Twitter in 2008.
The largest decline in the number of users is expected to occur in the United States, Twitter's largest market, and at the end of 2024 there will be 50.5 million American users on the platform - the lowest figure since 2014.
According to the forecast, growth in advertising revenue on Twitter will also drop to "zero" in the next two years, amid advertiser concerns about brand safety while the company becomes increasingly "unstable and less pleasant."
Twitter share: January 1 - October 1 (photo: official website, official website)
The Ice Age - Europe and North America freeze in the shadow of the energy crisis
Energy markets began to tighten in 2021 due to a variety of factors, including an accelerated economic recovery after the Corona epidemic.
But the situation escalated dramatically and developed into a global energy crisis after Russia's invasion of Ukraine in February 2022. The
price of natural gas soared to a record high, and as a result, the price of electricity also rose.
The price of a barrel of oil has reached its highest level since 2008. High energy prices have contributed to high inflation, pushed families below the poverty line, forced factories to reduce output or stop operations altogether, and slowed economic growth to the point where fears of a deep recession arose in some countries, such as the United Kingdom.
Europe, which depends on Russia as a source of gas supply, has already decided to implement gas rationing this winter, while many developing economies are registering a sharp increase in the cost of importing energy products and fuel shortages.
Manufacturing plants that operate on gas in Europe reduced output because gas costs became too expensive, while in China some plants cut off the electricity supply.
In developing economies, where the share of the household budget devoted to energy and food is already high, the poverty rate has soared.
Even in the developed economies, the rise in prices affected low-income households and caused economic, social and political pressures.
The Russian invasion of Ukraine exacerbated the situation.
The United States and the European Union have imposed a series of sanctions on Russia, and many European countries have announced their intention to end dependence on Russian gas completely.
At the same time, Russia began to limit and even completely cut off the supply of gas through export pipelines.
Russia is the largest exporter of fossil fuels in the world, and a major supplier to Europe.
In 2021, a quarter of all energy consumed in the EU came from Russia.
While Europe is trying to replace Russian gas, the prices of American, Australian and Qatari natural gas have soared.
Because the price of electricity - similar to the price of fuel which depends on oil - depends on the price of gas, electricity prices also skyrocketed.
In addition, the desire to break away from dependence on Russia in Europe, the United States and Asia, and the sanctions imposed on the country, led to the fact that many tankers did not agree to transport Russian oil and large non-Russian oil producers were unable to increase output to meet the growing demand.
Recently, energy prices have come off their highs, but the outlook is uncertain.
At the beginning of November, the International Energy Agency (IEA) published a forecast according to which Europe should act immediately to avoid a shortage of gas in 2023, in light of the cessation of supplies from Russia and an increase in demand in China.
In addition, the individual economies are much more interconnected than they were 50 years ago - which amplifies the impact of the crisis.
For this reason, the crisis can now be called the first global energy crisis.
One bright spot is that the current energy crisis may accelerate the development, market entry and adoption of sustainable and clean renewable energies, such as wind and solar, as the energy crisis of the 1970s did to the field of energy efficiency.
However, although the crisis today shares some common characteristics with the crisis in the 1970s, there are significant differences between the two.
The crisis today concerns fossil fuels, back in the 70's it was limited to oil while the global economy depended mainly on oil, and less on gas.
The price of a barrel of Texas Sweet crude oil (photo: official website, official website)
A new arrival - inflation is rearing its head, the governors are raising interest rates
One of the big economic stories of 2022 was high inflation.
All products, from fuel and food to entertainment, were more expensive this year.
The Federal Bank took steps aimed at curbing the increase.
At the same time, the rate of salary growth does not manage to catch up with the rate of inflation, which reduced the budget of all of us.
Economists and citizens alike are wondering whether inflation is here to stay and how much the Fed will raise interest rates in its war against the rising cost of living.
Before the outbreak of the corona epidemic, inflation was low for three decades, when the inflation rate of 5.4% in the United States in the 90s was the highest, and most of the time inflation was about 2% - the target of the Federal Bank.
However, as the epidemic began to subside, inflation began to rise.
The corona virus broke out in the world at the beginning of 2020 and shook the global economy due to the closures and disruptions in the global supply chains.
Inflation began to soar in the United States in April 2021, reaching 4.1%.
It continued to rise and in December stood at 7%, compared to December 2020.
In 2022, there was no slowdown in the rate of inflation and it recorded a record in June of 9.1%.
From July, inflation began to decrease slightly, and in November it stood at 7.7%.
Initially, many believed that this was temporary inflation because it was a response to the drop in inflation during the pandemic.
Disruptions in supply chains and price increases in some sectors of the economy, such as used cars, exacerbated the situation.
The Federal Reserve Bank expected prices to return to normal levels shortly - but this did not happen.
Another factor that contributed to inflation is the decision of the Organization of Petroleum Exporting Countries (OPEC) to cut oil output by two million barrels per day, which immediately led to a spike in fuel prices. This is the largest cut by the organization since the outbreak of the epidemic.
The Russian invasion of Ukraine in February 2022 also contributed to the increase in inflation.
Russia controls its oil supply to Europe mainly.
Ukraine is a huge food exporter.
During the war, Ukrainian exports were halted and Russia cut oil exports as a way to pressure Western countries to reduce or stop aid to Ukraine altogether.
Both occurrences led to shortages and rising prices.
The Federal Reserve Bank is supposed to maintain a high level of employment and a reasonable rate of inflation.
The bank's inflation target is 2% - and when this threshold was crossed, the bank realized that it had to take steps to curb the increase in prices.
The interest rate set by the Federal Bank was for years, until recently, 0% - the result of the global financial crisis in 2008 and the monetary policy implemented by the bank to stabilize the economy after it.
The bank began to raise the interest rate as part of the attempt to curb the rise in prices, despite criticism that it was its monetary policy that contributed to the high inflation.
In 2022, the bank raised the interest rate seven times and now it stands at 4.5%.
Central banks around the world, which had kept interest rates at 0% for years, followed the Bank of America's lead, raising interest rates as well.
The interest rate in the USA (photo: official website, official website)
The Chinese wall - the trade war between China and the US did not end even in the Biden era
When Joe Biden entered the White House in January 2021, there were expectations from China and his administration that he would withdraw from the trade war that his predecessor, Donald Trump, had started three years earlier.
Trump, feeling excessive frustration with China's huge trade balance and accusing it of stealing American intellectual property, imposed tariffs worth $50 billion on Chinese goods in June 2018. Beijing responded with a similar move, and so it continued until 2020.
Biden surprised everyone, not only that he He did not cancel the tariffs, but he even exacerbated the conflict.
In October, the Biden administration imposed sweeping new tariffs that are meant to block the world's second-largest economy's access to the technology it needs to bolster its military power.
At the same time, most of the communication channels between the two countries were cut off, after the controversial visit in July of then Speaker of the House of Representatives Nancy Pelosi to Taiwan.
Biden in October imposed a cap on the sale of advanced chips and chip-making equipment.
He imposed a ban on the import of products made in Xinjiang due to the government's human rights abuses and other crimes against the Uyghur ethnic group living in the autonomous region in the northwest of the country.
Several Chinese companies in the region have been blacklisted by the US government.
In addition, sanctions were imposed on dozens of senior officials from China and Hong Kong due to what is happening in Xinjiang province.
According to Dexter Roberts, a senior fellow at the Atlantic Council research institute, it will be very difficult to stabilize the economic relations between the United States and China in view of the low point where they are now and the shattered expectations on both sides.
"First, the fact that Biden didn't try to find a way to reduce Trump's $300 billion worth of tariffs, contrary to expectations, is a big deal. To Beijing's astonishment, on the trade issue, Biden not only did not improve the situation, but actually made it worse," Roberts told -CNN
Chinese President Xi Jinping is received by Mohammed bin Salman in Riyadh and pokes a finger in the American eye, as part of the trade war between the two superpowers (Photo: Reuters)
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