8 Key Market Events in 2022 And How They Shifted the Market

The year 2022 has been filled with market-moving events, ranging from political movements to company takeovers, the great fall of some crypto coins, and even a war.  As the year has come to an end, let’s take a look back at how 2022 unfolded, by highlighting the key market events that any trader or non-trader would need to know about.

 1. Russia-Ukraine War

Just a few days after the Beijing 2022 Winter Olympics ended, the world was shocked to learn that Russian President Vladimir Putin announced a military operation in Ukraine on 24 February 2022. This marked the start of the Russia-Ukraine war that has been ongoing till this day. The war has further escalated the global supply chain crisis, which was already facing massive disruption due to the Covid-19 pandemic.

As the war has escalated, the European Union imposed massive and unprecedented sanctions against Russia in response to the military aggression against Ukraine. Similarly, the US also imposed a ban on Russian oil. These sanctions made up 45% of Russia’s federal budget in 2021 ^[1].

The international benchmark Brent crude surpassed $100 a barrel for the first time since 2014 before closing at $99.08 per barrel at the end of 24 February 2022. On 8 March 2022, the benchmark saw the price of a barrel achieving an all-time high of $127.98 per barrel. The price surged after US President, Joe Biden, announced that the US would ban imports of Russian energy and the UK announced it would phase out Russian products by the end of the year ^[2].

2. The Assassination of Shinzo Abe

Shinzo Abe was the former prime minister of Japan. He was assassinated on 8 July 2022 while speaking at a political event outside a train station in Nara. Shinzo Abe was best known for his signature economic policy, “Abenomics”. Shinzo Abe’s death could affect the Bank of Japan’s ultra-loose monetary policy, which might not be a positive signal to the stock market.

The Nikkei index climbed as much as 1.4% earlier in the session. However, it ended with just a 0.1% increase at the end of the day and with the news of Shinzo Abe’s assassination. The broader TOPIX index also cut most of its gain to close 0.27% higher at the end of the day ^[3].

3. Queen Elizabeth II Passing

On 8 September 2022, the world was shocked by the passing of Queen Elizabeth II, one of the longest-reigning British Monarchs. In light of the event, the BoE delayed its interest rate decision by a week due to royal mourning. The FTSE 100 Index closed at 1.4% higher on 9 September 2022, just a day after the news, with mining companies leading the way thanks to a softening dollar ^[4].

4. Liz Truss Resignation 

The leader of the governing Conservative party in the UK, Liz Truss, who took office after Johnson Boris, officially announced her intention to resign on 20 October 2022. This made her the shortest-serving prime minister in UK history, serving just 44 days in the office.

In the short period of her time in the office, she made an impact on the UK economy with her proposed monetary policies. These massive tax cuts and substantial spending plans aimed to boost the country’s economic growth. However, it came just a day after the Bank of England (BoE) hiked interest rates to contain the surging inflation ^[5].

This move led the British Pound to fall to an all-time low against the US Dollar as both investors and traders were not convinced with this approach. The BoE was also forced to step in to support the bond market and prevent a possible broader economic collapse on 26 September 2022, just three days after the announcement of the proposed monetary policy ^[6].

On the day of her resignation announcement, the FTSE 100 Index rose 0.3%, closing at 6943.91 GBP ^[7]. Liz Truss was subsequently succeeded by Rishi Sunak who made history as the first British Asian and Hindu to be Britain’s prime minister. 

5. Crypto Collapse: Terra-Luna and FTX

In May 2022, the crypto community was shocked to see the collapse of Terra-Luna, where the price fell 99.7% in a week. This was because the algorithmic stablecoins like terraUSD (UST), which was meant to be priced 1:1 to the US dollar, lost its peg. The UST price fell to as low as $0.35, and this caused additional LUNA tokens to be minted and issued to the open market ^[8]. As the supply of the LUNA token increased, it left traders to sell their LUNA tokens in fear of the price dropping even more. 

The broader crypto market also experienced a sell-off during this period. The price of Bitcoin on 1 May 2022 fell from $38,469.09 to $28,627.57 on 27 May 2022 ^[9]. Ethereum was trading at $2,827.76 and closed at its lowest of the month at $1,724.92 on 27 May 2022.

Another major crypto collapse occurred in November when CoinDesk reported that Alameda Research, a crypto trading firm co-founded by Sam Bankman-Fried, had billions of dollars’ worth of FTT tokens ^[10]. This token was issued by FTX, a cryptocurrency exchange that Sam Bankman-Fried also founded in 2019. This raised suspicion about FTX as many believed the cryptocurrency exchange did not have the liquidity needed to back transactions. On 11 November 2022, FTX announced that it had filed for voluntary Chapter 11 bankruptcy, and FTX.US froze withdrawals as well ^[11].

The collapse of FTX rippled through the cryptocurrency market. The price of Bitcoin and Ethereum fell to $17,034.29 and $1,287.22 on 11 November 2022. This was a drop of 16.8% and 18.5% since 1 November 2022 ^[12]. The crypto market continues to remain on its toes as it is still unclear how the FTX saga would eventually end, and whether this would further weaken the trust in investors and traders have towards cryptocurrency.

6. Europe Fuel Crisis and OPEC Oil Cut

Since 31 August 2022, Russia has indefinitely cut off gas supplies to Europe in response to the Western sanctions imposed on the country since its conflict with Ukraine. This threw Europe into its biggest fuel and energy crisis this year. Countries are competing to buy liquified natural gas (LNG) and find alternative sources. In addition, the Organization of the Petroleum Exporting Countries (OPEC) also announced a new policy where they would continue to restrict supply by 2 million barrels per day, a policy that will continue to run through the end of 2023 ^[13].

The OPEC alliance is said to have adopted this move in order to proactively adjust supply ahead of a possible reduction in demand due to the slowing global economy. Oil prices have been slowly recovering early this year since the pandemic in 2020. International benchmark Brent crude was down 29.7% from early June when it was trading at over $123.58 per barrel ^[14]. It was trading at $86.88 on 1 December 2022, one month since the policy announcement by OPEC.

7. China Easing of Zero-Covid Policy

In early December 2022, it was widely reported that mass public protests set off in various Chinese cities over China’s stringent zero-Covid restrictions. It was reportedly triggered by a deadly fire which broke out in a residential building under the Covid-19 lockdown in Urumqi. The pandemic control barriers may have prevented residents from escaping and hindered firefighters’ attempts to rescue those who were trapped inside, killing ten people and injuring nine others. The protests have led to the relaxation of some strict pandemic control restrictions in December ^[15].

On 7 December 2022, China was set to announce the most sweeping changes to its resolute anti-covid regime and loosening rules that curbed the spread of the virus ^[16]. Hong Kong’s Hang Seng Index, which is heavily weighted toward Chinese companies, has climbed more than 28.8% since the start of November and achieved its highest on 9 December 2022, closing at 19,900.87 HKD ^[17]. The Mainland China CSI 300 Index climbed more than 10.02% since the start of November and closed at 3998.24 on 9 December 2022 ^[18]. On 27 December 2022, China announced that it will remove the quarantine requirements for travellers from 8 January 2023, as part of the country’s shift from its zero-Covid policy.

8. The US Federal Reserve Continuous Rate Hike

The US Federal Reserve has raised the fed’s funds rate seven times this year. In January, the Federal Funds Rate was at 0% to 0.25% and now fast forward to December it sits at 4.25% to 4.50%. These interest rate hikes come on the back of multi-decade-high inflation rates, hitting 9.1% in June ^[19].

The continuous rate hikes indicate that its fight against inflation is still ongoing, despite a reduction at the last hike, which was by 50 basis points. This has pushed the borrowing costs to the highest level since 2007 and is in line with market expectations. Chairman of the US Federal Reserve, Jerome Powell, mentioned that the Federal Reserve will deliver more interest rate hikes in 2023 as the economy is slipping towards a possible recession ^[20].

As the news of the latest rate hike was announced on 14 December 2022, the Dow Jones Industrial Average dropped 0.42%, the S&P 500 dropped 0.61%, and the Nasdaq Composite dropped 0.76%, showing the concerns that traders and investors have about the upcoming indication of more rate hikes in 2023 ^[21].

Conclusion

Learning and understanding how the market reacts to certain key events will help traders and investors both to trade smarter. By learning from these now-historical events, traders can be better prepared to face similar types of key events, should they happen again in the future.

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