January 28, 2023
Stock market

2022 Worst Year Since 2008 Financial Crisis

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Last trading day of 2022 for global markets results in steep losses capping the year as the worst in over a decade

US stocks dropped on Friday as investors made their final trades in what was the worst year for the market since the financial crisis of 2008 amid growing recession fears.

The Dow Jones Industrial Average slid 280 points, or 0.8%, on the last trading day of 2022, and finished down over 9% for the year. The S&P 500 shed 1.1% on Friday, and lost almost 20% for the year, while the Nasdaq Composite dropped 1.4% on Friday. The tech-heavy index nosedived by over 30% for the year.

The three major indices finished what has been their worst year since 2008, as soaring inflation and aggressive rate hikes from the US Federal Reserve battered growth and weighed on investor sentiment.

Inflation in the US hit a four-decade high this year, with consumer prices soaring by over 9% in the summer in annual terms. The inflation rate slowed towards the end of the year. However, experts expect it to remain above the pre-pandemic levels and believe that it will take a few years for price growth to return to 2019 levels.

Meanwhile, although some investors expect next year to herald a market recovery, many others warn that stocks could hit new lows in 2023.

“We’re sort of stuck in neutral right now, because there are more unanswered questions than there are known entities,” a senior market strategist at Riverfront Investment Group Rebecca Felton told CNBC.

“We’ve got a lot riding on this coming earnings season, when we think about the pressures that are going to exist on margins,” she explained.

Major European stock indices struggled in 2022, with most showing their worst performance since before the Covid-19 pandemic, CNBC reported on Friday.

The pan-European Stoxx 600 index began the last trading day of the year down more than 12% versus a year ago, its worst yearly drop since a 13.24% plunge in 2018, according to the media outlet.

The French CAC 40 is on pace to register a 12% plunge for the year, while the German DAX is on track to lose 18% in 2022, the worst performance in five years in both cases. The UK’s FTSE 100 has done slightly better, but is still set to lose 2% for the year.

Analysts attribute the poor performance to this year’s geopolitical troubles, in particular the conflict in Ukraine and the subsequent sweeping sanctions against Russia by the West. The resulting global surge in food and energy prices has sent inflation in many countries to multi-decade highs, quickly ushering in a full-blown cost-of-living crisis in Western countries.

Meanwhile, the steps taken globally to stem the surge of inflation, such as interest rate hikes, which many central banks enacted this year, are seen by many as inadequate. Meanwhile, both the rising prices and higher borrowing costs have significantly affected industrial activity, causing many economists to warn of a looming global recession.

The lingering Covid-19 lockdowns in China, which were only recently lifted, also contributed to the uncertainty in stock markets.

Market experts say that the subdued appetite for riskier investments, such as stocks, that was seen throughout most of this year may remain in place in 2023.

“Investors are going into 2023 with a cautious mindset, prepared for more rate hikes, and expecting recessions around the globe. And then there’s China and its U-turn on Covid prevention. It’s been quite the shift from fighting every case to living with the virus and that creates enormous uncertainty for the start of the year,” Craig Erlam, senior market analyst at the forex trading platform OANDA, told Bloomberg.

“There are a lot of questions as we head into the new year, but we certainly will be happy to see 2022 over,” Felton added.

Source RT/AP/Reuters

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