Global stock markets lost $25 trillion in 2022 amid perfect storm of negative pressures, says report

“We witnessed a perfect storm in 2022 of so many negative pressures culminating to bring immense pressure on global stock markets, as our report highlights.”

The World Federation of Exchanges (WFE) has revealed that about $25 trillion was wiped off global stock markets in 2022, according to new data included in the FY 2022 Market Highlights published by the global industry group for exchanges and central clearing counterparties.

The report reveals that stock markets declined by 20% in market capitalisation and 10% in value traded in 2022, interrupting the positive trend observed in the two previous years.

Last year’s slump was caused by a number of factors including the aftermath of the Covid-19 pandemic which caused inflationary trends fuelled by strong consumer demand and supply bottlenecks exacerbated by the war in Ukraine and the sanctions against Russia, which increased energy prices, especially for European countries.

In addition, China spent most of 2022 applying the Zero Covid policy, with a renewed Covid lockdown. Such stringent measures enforced for most of the year strained the global supply chain, increasing the prices of imported goods.

The high inflation environment and the tightening of monetary policies cooled down investment in the equity market.

Nandini Sukumar, Chief Executive Officer at the WFE, said: “We witnessed a perfect storm in 2022 of so many negative pressures culminating to bring immense pressure on global stock markets, as our report highlights.”

WFE noted, however, that there was a pronounced increase in the case of options, possibly due to a greater need to hedge against market uncertainty.

A few of the highlights included in the report include:

Cash equity

  • Global equity market capitalisation declined annually by approximately 20% in 2022, with all regions declining significantly. In absolute terms, this represents more than $25 trillion wiped off stock markets worldwide.
  • While trading value fell about 10% globally in 2022, with trading value declining in every region, global volumes increased about 5%, with every region contributing to this result. 2022 recorded the highest global volumes in the last six years (48.32 billion trades) and the highest regional volumes during the same period: the Americas (13.44 billion trades), APAC (31.13 billion trades) and the EMEA region (3.74 billion trades).
  • The number of IPOs and the capital raised through IPOs declined sharply compared to 2021 (-50% and -65%, respectively)

Exchange-traded derivatives

  • The number of exchange-traded derivatives contracts, including both options and futures, reached their highest level in the last six years, amounting to 56.17 billion for options and 29.59 billion for futures (84.76 billion derivatives contracts traded). This represents a 34.4% increase compared to 2021.
  • Commodity derivatives were the only product line whose overall volumes (that is, considering both futures and options) declined in 2022 (-14.5%), while equity, currency, and ETF derivatives volumes witnessed double digit increases (48.4%, 48.2%, and 36.9%, respectively).
    Interest rate derivatives volumes increased 8.5% year-on-year.

Other products

  • While the number of listed exchange-traded funds (ETFs) increased only 5% when compared to 2021, the ETF value traded increased considerably (32.2%), due to increases in every region.
  • The number of listed securitised derivatives (SD) went slightly up year-on-year (2.6%), but the value traded declined year-on-year (-21.6%), due to declines in every region.
  • The number of listed investment funds (IF) fell year-on-year (-6.1%) while the value traded increased 12.5%. EMEA region recorded declines in both the number of listed investment funds and in value traded, while in the Americas both changes were positive. The APAC region recorded the largest drop in the number of listed funds and the largest increase in value traded.