The2022 stock market decline was abear market that included the decline of several stock market indices worldwide between January and October 2022. The decline was due to the highest inflation readings as part of the2021–2023 inflation surge and the resulting increases in interest rates, combined with the worst year for the bond market since 1994 with fears of a globalrecession due to a decline ineconomic indicators and aninverted yield curve, exacerbated bysupply chain disruptions due to theRussian invasion of Ukraine and uncertainty over the long-term effects of theCOVID-19 pandemic on the economy.[1][2]
In 2021 manycentral banks undertook azero interest rate policy, assuming the rise in inflation to be "temporary" or "transitory". In 2022, when inflation readings were much higher and stickier than originally expected, central banks rapidly tightened policy and reduced market liquidity. TheFederal Reserve raised interest rates 11 times starting in March 2022, resulting in the highest nominal interest rates since the 2000s.[3] It also reintroduced a policy ofquantitative tightening in June 2022.[4] TheEuropean Central Bank raised rates 10 consecutive times during the same period.[5]
In the first quarter of 2022, U.S. gross domestic product (GDP) posted its first decline since theCOVID-19 recession; decreasing at an annual rate of 1.0% in the first quarter of 2022.[6] GDP growth rates in the European Union also slowed significantly in the first half of 2022.[7]
But the rate of inflation peaked in late 2022 and declined thereafter, while economic growth accelerated in the second half of 2022, ending fears of a recession and leading to a rebound in stock prices starting in late 2022. The end of the stock market decline was also a result of the start of theAI boom, predictions of lower or stable interest rates, and predictions of asoft landing.[8] By 2023 and 2024, many stock market indices reached all-time highs.[9]
In 2022 theMSCI World Index index, which tracksdeveloped markets, was down 17.7%. Theemerging markets index declined 19.7%. Asia overall was down 20.8% due to a 21.8% decline in Chinese stocks, a 29.1% decline in Taiwan, and a 28.9% decline in Korea.[10]
Stocks in Europe outperformed on the year due to lower valuations. TheSTOXX Europe 600 lost 12% on the year, theDAX lost 12.5%, and theCAC 40 lost 9.5%.[18]
TheNikkei 225 started the year at around 29,000 but fell to 25,000 by March. It ended the year down 9%.[19] However, by 2024, it hit all time highs.[20]
By November 2022 theHang Seng Index was down 36% year-to-date, one of the worst performances among major stock market indices. The decline was exacerbated whenXi Jinping won a third tenure of thegeneral secretaryship, and investors feared that he would prioritize state-owned firms over private companies.[21] The decline was also due to concerns over the economic effects ofXi Jinping'sZero-COVID strategy and its regulatory crackdown and fines on companies such asAnt Group.[22]
As part of the global decline in most risky assets, the price ofBitcoin fell 59% in 2022, and it declined 72% from its then all-time high reached on November 8, 2021. The decline was at its worst in June 2022; an article inThe Wall Street Journal published that month was titled "The Crypto Party Is Over".[23] However, by 2024, many cryptocurrencies reached all-time highs.
