This year, the WFE 2022 Market Highlights report brings together in a single report the equity and derivatives markets, summarising the evolution of multiple key financial market indicators across these markets and offering a comprehensive picture of market activities during 2022.[1]
In 2022, we saw a noticeable decline in the global stock market, both in market capitalisation (-20%) and in value traded (-10%), interrupting the positive trend observed in the two previous years. Several defining themes and drivers emerge. First, the inflationary trends fuelled by strong consumer demand and supply bottlenecks in the aftermath of the pandemic were exacerbated by the war in Ukraine and the sanctions against Russia, which increased energy prices, especially for European countries. In addition, the still stringent COVID lockdown requirements in China, enforced most of the year, strained the global supply chain, increasing prices of imported goods. The high inflation environment, alongside the tightening of monetary policies (including raising interest rates across most economies), cooled down investment in the equity market. The decline in the equity market indicators was more noticeable in the technology sector, which experienced a “tech plunge”. Although the linkages of the crypto markets with the traditional financial markets are still limited, it is worth noting that the collapse of the crypto trading platform FTX brought to the surface a lack of regulatory oversight and proper corporate governance in these platforms, highlighting the importance of regulated exchanges as the trusted, industry gold-standard.
Finally, with the exception of commodity derivatives, volumes of exchange-traded derivatives continued with their positive trend, with a pronounced increase in the case of options, which could be due to a higher need to hedge against (or even speculate on) market uncertainty.
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[1] In previous years, the end-of-year equity markets report (“Annual Market Highlights”) and the annual derivatives report (“Annual Derivatives Report”) were published separately.
