WFE estimated that worldwide stock markets will lose $25 trillion In 2022
The World Federation of Exchanges (WFE) said that $25 trillion was lost from markets globally in 2022, making it a difficult year for international stock markets.
According to the WFE’s FY 2022 Market Highlights report, the stock markets had a 20% drop in market capitalization and a 10% drop in value traded, reversing the upward trend of the previous two years.
The paper identifies important causes of the downturn, including inflation, the conflict in the Ukraine, and China’s Covid shutdown.
Consumer demand and supply limits due to the Ukraine crisis and Russia sanctions have raised energy prices, particularly in Europe. The tight Covid lockup in China also put a burden on the global supply chain, raising import prices.
Due to the high inflation environment, monetary policies were tightened, which included hiking interest rates in most economies. Investment in the equity market also decreased as a result.
According to Nandini Sukumar, CEO of the WFE, a perfect storm of adverse factors culminated in 2022, placing tremendous pressure on the world’s stock markets, as our report reveals.
Despite the report’s bad news, the stock market did endure a big drop. With the exception of commodities derivatives, volume in exchange-traded derivatives remained on an upward trend. The demand for hedging against market uncertainty may have contributed to the dramatic expansion in the use of options.
56.17 billion options and 29.59 billion futures contracts traded on exchanges set records (84.76 billion derivatives contracts traded). When compared to 2021, this is an increase of 34.4%.
The research also highlights product-specific patterns such IPO funding declines, interest rate derivative volume growth, and traded listed securitized derivative value declines.
WFE has been the global trade group for exchanges and clearing houses since its inception in 1961.