From Amazon to zero Covid: an A-Z of financial markets in 2022

The year was dominated by rollercoaster news stories such as Elon Musk’s turbulent takeover of Twitter, the downfall of Elizabeth Holmes and the numerous cryptocurrency scandals

Kim Kardashian and Kanye West: both superstars were hit financially in their interactions with the markets this year. Photograph: Ian West/PA

Amazon, whose market value pushed through the $1 trillion (€950 billion) level in April 2020 as online retailing took off during the initial wave of Covid-19 lockdowns, saw its price plunge this year as the group, led by founder and executive chairman Jeff Bezos, was forced to scale back its delivery network as consumers returned to stores. Amazon has lost almost half of its value so far this year.

Irish banking stocks were a rare bright spot in weak overall equity markets this year, as they stood out as the main beneficiaries from rising European Central Bank (ECB) rates, given how they are more reliant than the average European bank on interest income. AIB, Bank of Ireland and Permanent TSB also continued to benefit from advancing plans to carve up most of the loan books of Ulster Bank and KBC Bank Ireland as the two overseas-owned banks retreat from the market. The Iseq Financial index, dominated by the banks, rose more than 50 per cent during 2022.

The brief history of cryptocurrencies has been a rollercoaster ride for investors. But 2022 was something else. Rather than acting as much-touted hedges against inflation, digital currencies such as Bitcoin and Ethereum plunged more than 60 per cent during the year. The collapse of a so-called stablecoin, TerraUSD, in May led to the downfall of crypto lenders Voyager Digital and Celsius Network. However, the unravelling of the FTX crypto exchange in November was the sector’s biggest scandal to date, with its founder Sam Bankman-Fried arrested in December in the Bahamas and now facing charges in the United States of defrauding investors.

US dollar strength was one of the prevailing market themes of 2022, as the safe-haven attributes of the greenback, the dominant global reserve currency since the second World War, came to the fore amid the Ukraine conflict – and as the Federal Reserve moved most aggressively among the world’s main central banks to hike interest rates to combat soaring inflation. The dollar briefly surpassed parity with the euro in July, for the first time in almost 20 years.

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As if Elon Musk, the multitasking chief executive and product architect of electric carmaker Tesla and CEO and chief engineer of rocket company SpaceX, didn’t have enough on his plate already, the tech billionaire stuck a $44 billion deal in April to buy Twitter. After a bout of buyer’s remorse resulted in a lawsuit from Twitter, the self-styled chief twit proceeded with the deal in October, then embarked on a firing frenzy at the social media group.

Francesca McDonagh stepped down as chief executive of Bank of Ireland after five years in September, to become chief operating officer of the embattled Credit Suisse group. Shares in the Swiss financial giant, the subject of a string of scandals in recent years, have failed to stabilise since McDonagh’s new boss, Ulrich Koerner, unveiled a deep turnaround plan in October.

European wholesale gas prices – measured by the benchmark Dutch Title Transfer Facility – soared close to 400 per cent to €340 per megawatt hour in the six months after Russia invaded Ukraine, putting huge pressure on the continent’s energy mix. While prices have since fallen sharply as European gas storage is close to full for the winter season and temperatures during autumn proved to be milder than expected, they remain more than double where they stood in mid-February.

Elizabeth Holmes, the founder of Theranos, the Silicon Valley blood testing start-up that turned out to be a massive fraud, was sentenced by a judge in California in November to 11 years and three months imprisonment, starting from next April.

Interest rate speculation kept investors occupied throughout 2022, with prices of bonds and equities routinely whipsawing as the markets digested every utterance from leading central bankers. The Federal Reserve led the way, increasing its key short-term rate from close to zero to a range of 4.25 to 4.5 per cent. The ECB, meanwhile, lagged behind its peers, but has gone on to hike its main lending rate from zero to 2.5 per cent since July.

Johnson & Johnson, the healthcare group, has spent this year planning for the spin-off of its consumer health division – which sells everything from Listerine mouthwash to Band-Aids and baby powder – from its prescription drug and medical-device businesses. The new company, Kenvue, is expected to start trading separately in late 2023.

Reality TV star Kim Kardashian agreed in October to pay $1.26 million to the US Securities and Exchange Commission (SEC) to settle a case for “unlawfully touting” a crypto asset on her Instagram feed. Legal commentators suggested the SEC’s targeting of Kardashian was sending a message to other so-called influencers who might be promoting cryptocurrencies or other investment assets.

The market chaos caused by Liz Truss’s mini-budget in September exposed vulnerabilities in a hitherto little-known part of the pensions sector, called liability-driven investments (LDI). At a basic level, LDI strategies are supposed to match pension funds’ payout liabilities with plain-vanilla bonds. However, it became apparent, as UK government bonds tanked following the budget, that many funds had used high levels of leveraged financial derivatives to increase their exposure to bonds they didn’t actually hold. The Bank of England was forced to step into the market to buy bonds to avert pension fund collapses.

CRH’s annual report for 2021 revealed that Albert Manifold enjoyed remuneration of €13.9 million last year, setting a new record for the head of an Iseq company. The building materials giant also had the worst CEO-to-median-employment salary ratio of any FTSE 100 company last year, at 289 to one, according to Tortoise Media.

Non-bank mortgage lenders ICS Mortgages, Finance Ireland and Avant Money started offering fresh competition in the Irish home loans market from 2018. However, while the banks fund most of their mortgages from deposits, which are generating little or nothing for savers, non-banks rely on wholesale funding, where borrowing rates spiked during the year as investors speculated on the pace of central bank hikes. These lenders have had to hike their mortgage costs at a faster rate than mainstream banks, hitting their competitive advantage at a time when Ulster Bank and KBC Bank Ireland are exiting the market.

Denis O’Brien’s Digicel, which restructured its debt twice in the past four years, was back in the sights of creditors as they eyed $925 million (€879 million) of bonds that fall due for repayment next March. The value of the bonds fell below 40 cent on the dollar in recent months, amid investor fears that they may not recover all of their money. It emerged earlier this month that Digicel is in talks with large holders of these bonds to try and postpone repayment.

While stock market flotations slowed to a trickle globally amid heightened market volatility in 2022 – following a record-breaking year in 2021 – Porsche managed to deliver continental Europe’s largest initial public offering (IPO) since the turn of the millennium.

Major central banks, including the Fed and ECB, have pumped more than $26 trillion into the financial system by way of buying bonds on the market since the financial crisis of 2008, with some $11 trillion of this coming as a response to the Covid-19 pandemic alone, according to the Atlantic Council, the US think tank. This is known as quantitative easing. However, quantitative tightening is now becoming the order of the day, with the Fed having started to shrink its balance sheet over the summer. Meanwhile, the ECB stopped net new bond purchases earlier this year and is all but certain to start selling down its €5 billion portfolio in 2023.

The effects of soaring inflation on households and businesses globally – and central banks’ efforts to tackle it – led to mounting concerns as 2022 progressed that the world economy is heading inexorably into recession. The European Commission estimated that the EU started to contract in the current quarter. A recent poll of economists by Reuters put a 60 per cent probability on a US recession next year.

Special purpose acquisition companies (Spacs), or blank cheque companies, may have been the hottest type of vehicle to float in US markets in 2020 and 2021, as central banks kept financial markets running during the height of the pandemic. However, they fell dramatically out of favour this year amid declining stock markets and rising oversight of this area by US regulators. Spacs have had to return billions to investors in recent months after failing to find deals.

The tech meltdown, initially used to describe a slump in growth-oriented technology stocks earlier this year as interest rates started to rise, evolved to cover an inevitable spate of layoffs across industry players, including Facebook parent Meta, Twitter, Stripe, and Amazon.

The Ukraine war, sparked as Russia invaded its south-western neighbour on February 24th, was by far the biggest geopolitical event to rattle financial markets this year, as western sanctions and Russian actions led to a surge in energy and food prices – compounding the effects of the pandemic on inflation.

While dealmaking declined globally in 2022 as companies fretted about the economic outlook, one of the largest struck during the year was US cloud computing group VMWare’s agreement in May to be acquired by chipmaker Broadcom for $61 billion. The takeover still remains subject to regulatory approval.

Walt Disney’s goodbye in late 2021 to Bob Iger, who had turned the group into an entertainment powerhouse through the acquisitions of Pixar, Marvel Entertainment and 21st century Fox during his 15 years at the helm, didn’t last long. The company wooed Iger back 11 months later, following the abrupt dismissal of his handpicked successor, Bob Chapek.

Xavier Niel, the French telecoms magnate who took control of Eir in 2018, shared €800 million of dividends from the telecoms during the course of this year with two minority shareholders, US hedge funds Anchorage and Davidson Kempner. It brings total payouts since the takeover to €1.73 billion. The latest was underpinned as Eir sold a 49 per cent stake in its wholesale broadband subsidiary, which went on to raise €765 million of debt. Fitch downgraded Eir’s debt – including tradable bonds – last month by one notch to a level that is three rungs deep into what’s known as junk grade.

Adidas terminated its partnership with the rapper and fashion designer Ye, the artist previously known as Kanye West and erstwhile husband of Kim Kardashian, after he made a series of anti-Semitic remarks. The German sportswear giant said that dropping of Yeezy, Ye’s company, which covers runners and clothing, would hit its earnings to the tune of €250 million in 2022.

China’s zero-Covid policy regularly upset global supply chains during the year, as it resulted in long lockdowns in major cities. However, authorities eased the most severe restrictions, including letting some people quarantine at home rather than in state-run camps, earlier this month following a wave of protests. The virus is now spreading rapidly in the country. Some experts, such as Feng Zijian, former deputy director of China’s Centre for Disease Control and Prevention, say that 60 per cent of its 1.4 billion population could be infected in the first large-scale wave of infection before stabilising.

Joe Brennan

Joe Brennan

Joe Brennan is Markets Correspondent of The Irish Times