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The 2022–2023
bear market
A market trend is a perceived tendency of financial markets to move in a particular direction over time. Analysts classify these trends as ''secular'' for long time-frames, ''primary'' for medium time-frames, and ''secondary'' for short time-fram ...
is an ongoing
economic
An economy is an area of the production, distribution and trade, as well as consumption of goods and services. In general, it is defined as a social domain that emphasize the practices, discourses, and material expressions associated with the ...
event involving a decline in
stock markets globally.
In the years leading up to the decline, the
COVID-19 pandemic
The COVID-19 pandemic, also known as the coronavirus pandemic, is an ongoing global pandemic of coronavirus disease 2019 (COVID-19) caused by severe acute respiratory syndrome coronavirus 2 (SARS-CoV-2). The novel virus was first identi ...
resulted in
a global economic recession. Although direct effects due to the recession largely subsided by 2022, the recession resulted in
an inflation surge and
a global supply chain crisis.
In February 2022, the
Russian invasion of Ukraine
On 24 February 2022, in a major escalation of the Russo-Ukrainian War, which began in 2014. The invasion has resulted in tens of thousands of deaths on both sides. It has caused Europe's largest refugee crisis since World War II. An ...
caused a sell-off across many financial markets throughout the world.
The
2023 United States banking crisis
Over the course of five days in March 2023, three small-to-mid size U.S. banks failed, triggering a sharp decline in global bank stock prices and swift response by regulators to prevent potential global contagion. Silicon Valley Bank (SVB) fail ...
and risks involving several European banks such as
Credit Suisse contributed even further to the decline of the financial markets in the United States and across the world.
The stock market decline has had a serious negative impact on economies throughout the world. In the
United States
The United States of America (U.S.A. or USA), commonly known as the United States (U.S. or US) or America, is a country primarily located in North America. It consists of 50 states, a federal district, five major unincorporated territori ...
, the
S&P 500
The Standard and Poor's 500, or simply the S&P 500, is a stock market index tracking the stock performance of 500 large companies listed on stock exchanges in the United States. It is one of the most commonly followed equity indices. As of ...
stock market index peaked in January and began a gradual decline. In September, the S&P 500 would experience its largest drop since March 2020.
As of January 3, 2023, the
S&P500 index fell 20% and the
Nasdaq Composite
The Nasdaq Composite ( ticker symbol ^IXIC) is a stock market index that includes almost all stocks listed on the Nasdaq stock exchange. Along with the Dow Jones Industrial Average and S&P 500, it is one of the three most-followed stock market ind ...
fell 35% from their all time highs.
Causes
The global financial instability in 2022 is a holdover from the
COVID-19 pandemic
The COVID-19 pandemic, also known as the coronavirus pandemic, is an ongoing global pandemic of coronavirus disease 2019 (COVID-19) caused by severe acute respiratory syndrome coronavirus 2 (SARS-CoV-2). The novel virus was first identi ...
, as investors attempted to determine the long-term effects of the pandemic on the global economy. Global indices began to decline after January 2022. However, the
Russian invasion of Ukraine
On 24 February 2022, in a major escalation of the Russo-Ukrainian War, which began in 2014. The invasion has resulted in tens of thousands of deaths on both sides. It has caused Europe's largest refugee crisis since World War II. An ...
escalated the decline as fears of energy disruption became apparent.
Global markets were also impacted by fears of economic recession. On June 13, 2022, the MSCI ACWI index, which tracks stock prices from both
emerging and
developed markets
In investing, a developed market is a country that is most developed in terms of its economy and capital markets. The country must be high income, but this also includes openness to foreign ownership, ease of capital movement, and efficiency of ma ...
, officially slipped into a
bear market
A market trend is a perceived tendency of financial markets to move in a particular direction over time. Analysts classify these trends as ''secular'' for long time-frames, ''primary'' for medium time-frames, and ''secondary'' for short time-fram ...
, falling 21% from a mid-November peak.
Effects
Effects on the United States
The
S&P 500 index
The Standard and Poor's 500, or simply the S&P 500, is a stock market index tracking the stock performance of 500 large companies listed on stock exchanges in the United States. It is one of the most commonly followed equity indices. As of D ...
peaked at 4,796 on its January 3 close and had since been on a downward trend for several months. In response to the inflation surge, the
Federal Reserve
The Federal Reserve System (often shortened to the Federal Reserve, or simply the Fed) is the central banking system of the United States of America. It was created on December 23, 1913, with the enactment of the Federal Reserve Act, after a ...
rapidly raised interest rates which further led to a decline in investor confidence. Markets favor low
interest rate
An interest rate is the amount of interest due per period, as a proportion of the amount lent, deposited, or borrowed (called the principal sum). The total interest on an amount lent or borrowed depends on the principal sum, the interest rate, ...
environments because they are conducive to future growth: when interest rates are low, companies can increase spending, which leads to increased stock prices. As the
United States
The United States of America (U.S.A. or USA), commonly known as the United States (U.S. or US) or America, is a country primarily located in North America. It consists of 50 states, a federal district, five major unincorporated territori ...
gross domestic product
Gross domestic product (GDP) is a monetary measure of the market value of all the final goods and services produced and sold (not resold) in a specific time period by countries. Due to its complex and subjective nature this measure is oft ...
shrank in the first quarter of 2022, fears of an
economic recession
In economics, a recession is a business cycle contraction when there is a general decline in economic activity. Recessions generally occur when there is a widespread drop in spending (an adverse demand shock). This may be triggered by variou ...
contributed to the decline in equity prices. The
gross domestic product
Gross domestic product (GDP) is a monetary measure of the market value of all the final goods and services produced and sold (not resold) in a specific time period by countries. Due to its complex and subjective nature this measure is oft ...
(GDP) decreased at an annual rate of 1.6 percent in the first quarter of 2022, according to the "third" estimate released by the
Bureau of Economic Analysis. By June 16, 2022, the S&P had fallen 23.55% from 4,796 to 3,666, though its currently unknown if the index will plunge below the level. The
DJIA
The Dow Jones Industrial Average (DJIA), Dow Jones, or simply the Dow (), is a stock market index of 30 prominent companies listed on stock exchanges in the United States.
The DJIA is one of the oldest and most commonly followed equity indexe ...
fell 18.78% since its January 4 high, while the
Nasdaq Composite
The Nasdaq Composite ( ticker symbol ^IXIC) is a stock market index that includes almost all stocks listed on the Nasdaq stock exchange. Along with the Dow Jones Industrial Average and S&P 500, it is one of the three most-followed stock market ind ...
fell 33.70% from its November 19 high.
On September 13, 2022, the S&P 500 experienced its largest single-day drop since June 2020.
Effects on China
Concerns over the economic effects of
China's
Zero-COVID strategy and its regulatory crackdown on companies like
Ant Group
Ant Group ()'','' formerly known as Ant Financial, is an affiliate company of the Chinese conglomerate Alibaba Group. The group owns the world's largest mobile (digital) payment platform Alipay, which serves over 1.3 billion users and 80 million ...
have led to a decline in Chinese stock prices. In June 2022, the
Alibaba Group's (NYSE: BABA) share price declined from a peak of over US$300 in mid-2020 to below US$100.
Effects on emerging markets
Emerging markets were hit by the worst sell-off in decades. The JPMorgan EMBI Global Diversified delivered returns of -15% in 2022. During the same period, ETFs that provide exposure to emerging markets such as VWO, IEMG, and EEM are all down more than 15% since the start of 2022.
Effects on cryptocurrency
As part of the global decline in most risky assets, the price of
Bitcoin fell 59% during the same time period, and it declined 72% from its November 8th all-time high. The price of cryptocurrencies like the aforementioned Bitcoin and
Ethereum
Ethereum is a decentralized, open-source blockchain with smart contract functionality. Ether (Abbreviation: ETH; sign: Ξ) is the native cryptocurrency of the platform. Among cryptocurrencies, ether is second only to bitcoin in market capita ...
plunged in June 2022 (the former of which suffered another decline) as investors moved their money out of risky assets.
References
{{Federal Reserve System
2022 in economics
Stock market crashes