The good news is that 2022 finally saw the world shake off the grip of Coronavirus as it transitioned from a pandemic to endemic (albeit it’s still causing problems in China). However, the past year turned out far more difficult for investors than might have been thought a year ago:
Inflation, which already rose in 2021 surged to levels not seen for decades, largely reflecting pandemic related distortions to supply and reopening & a stimulus driven surge in demand & floods in Australia.
Russia invaded Ukraine, leading to a surge in energy & food prices.
Central banks moved to aggressively withdraw monetary stimulus and
raised interest rates at the fastest pace seen in decades to deal with
inflation and rising inflation expectations.
Bond yields surged in response to the rise in inflation & interest rates.
Chinese growth fell sharply, reflecting its zero-Covid policy and a
continuing property downturn despite policy stimulus.
Geopolitical tensions surged with war in Ukraine and worries about a
Chinese invasion of Taiwan following President Xi Jinping’s power
consolidation, although there were hopes of a thaw near year end.
As a result of all this, investors increasingly fretted about recession.
Tech stocks and crypto currencies, having been the biggest winners of
the Covid lockdowns & easy money, were hit hard by reopening and monetary tightening, ultimately proving no hedge against inflation.