The year 2022 was one of the most turbulent in recent financial history. With central banks around the world responding to soaring inflation, geopolitical tensions escalating, and markets reacting with extreme volatility, asset performances diverged dramatically. From historic stock rallies to currency collapses and commodity chaos, this year redefined risk and reward across global markets.
The Era of Aggressive Rate Hikes Begins
Led by the U.S. Federal Reserve, central banks launched a synchronized tightening cycle not seen in decades. Starting March 17, the Fed implemented seven consecutive rate hikes, pushing the federal funds rate to 4.25%–4.5%—a 15-year high. This aggressive move aimed to tame inflation driven largely by surging energy costs but came at a steep cost: bond markets suffered their worst year in decades, and equities followed suit.
The rate hikes triggered a rare "double whammy" in stocks and bonds, a phenomenon known as 股债双杀 (equity-bond selloff). The U.S. 10-year Treasury yield jumped from 1.5% at the end of 2021 to over 3.8%, while the 2-year yield soared from 0.7% to 4.3%. These moves crushed fixed-income portfolios and pressured growth stocks, especially in tech.
👉 Discover how market volatility created unexpected opportunities in 2022.
Europe’s Struggle: Following the Fed Amid Crisis
As the Fed tightened, Europe faced compounding challenges: energy shortages due to geopolitical conflict and capital outflows driven by dollar strength. The European Central Bank responded with its most aggressive rate hikes in years—four increases totaling 250 basis points—abandoning its long-standing accommodative stance.
Despite these efforts, the euro weakened significantly, falling below parity against the U.S. dollar for the first time in two decades. The British pound also approached parity, exacerbated by former Prime Minister Liz Truss’s ill-fated "mini-budget," which proposed tax cuts for the wealthy and triggered a sell-off in UK gilts. Pension funds using liability-driven investment (LDI) strategies faced margin calls, nearly causing a systemic collapse.
China’s Relative Stability Amid Global Turmoil
In contrast, China maintained a relatively stable macroeconomic environment despite shifting pandemic policies. The yuan depreciated from 6.3 to 7.3 per dollar—a 14% decline—but this paled in comparison to the euro, yen, and pound. Meanwhile, China’s 10-year government bond yield rose only modestly to around 3.55%, reflecting steady monetary policy and resilient domestic demand.
This relative stability made Chinese assets a haven of predictability in an otherwise chaotic year.
Lithium: The Star Performer of the Commodity Market
Among raw materials, lithium stood out as the top gainer, driven by booming demand for electric vehicles and energy storage systems. Battery-grade lithium carbonate prices surged to 600,000 yuan per ton in November—up nearly 14-fold from its 2020 average.
Global EV sales rose 70% year-on-year, far outpacing new mine development timelines. Downstream buyers stockpiled supplies, while traders held back inventory, amplifying upward pressure on prices.
However, by December, signs of a correction emerged. The Pilbara Minerals auction price dropped, signaling potential market saturation. Analysts noted increased selling from producers and weak downstream demand due to seasonal slowdowns.
“After the cooling of procurement demand in mid-November, weak price expectations led to inventory adjustments across the supply chain,” said CICC analysts. “But with refinery maintenance and winter production cuts at salt lakes, coupled with pre-holiday restocking, supply-demand balance may improve before Lunar New Year.”
Nickel: The Return of “Demon Nickel”
Nickel prices rose about 40% in 2022, but the real story was volatility. In March, LME nickel futures spiked nearly 250% in two days due to a short squeeze, forcing the exchange to halt trading—a first in its 145-year history.
The crisis damaged LME’s credibility. Trading volumes dropped 30% in the following six months, liquidity dried up, and Chinese buyers began pushing for pricing via Shanghai Futures Exchange contracts instead.
With low inventories and fragile market structure, any news could trigger wild swings—proof that the metal remained a magnet for speculative risk.
👉 See how volatile markets reshaped investment strategies worldwide.
Macro Hedge Funds Shine: Shorting Bonds Paid Off
In a year defined by rising yields, macro hedge funds that bet against government debt reaped massive gains. Short positions on U.S., Japanese, and UK bonds delivered outsized returns.
Japan’s surprise policy shift in December shocked markets: the 10-year JGB yield jumped 21 basis points to 0.467%, the highest since 2015, triggering a temporary halt in futures trading.
Meanwhile, domestic Chinese bond markets held steady until November, when optimism over reopened economic activity reversed earlier trends. Rising risk appetite led investors to shift back into equities, causing bond outflows and yield increases.
Currencies Under Pressure: The Fall of the Yen
The Japanese yen became one of 2022’s biggest losers, plunging to 152 per dollar—its weakest level since 1992. While other major central banks hiked rates, Japan clung to yield curve control (YCC), creating a widening interest rate gap that fueled carry trades.
In September, Japan intervened in forex markets for the first time in 24 years, spending an estimated $157.5 billion from foreign reserves. Then, on December 21, it relaxed YCC policy—sending the yen soaring nearly 3% intraday to ¥133.
Some analysts now predict a reversal: Asymmetric Advisors’ Amir Anvarzadeh believes the yen could strengthen to 120 or higher by mid-2023.
Turkey’s Shocking Stock Rally: An “Inflation Bull Market”
Perhaps the most surprising story was Turkey’s BIST 100 Index, which surged 195%—the highest return globally.
How? Through what many call an inflation-driven bull market. With inflation exceeding 80% and the lira collapsing (down over 28%), stocks became one of the few assets preserving value for local investors.
Retail participation surged: individual trading accounts grew 32% year-to-date, reaching 3.1 million by November. As domestic investors fled cash, equities absorbed inflows despite economic distress.
Energy Markets: Chaos and Volatility
Energy was central to 2022’s inflation surge. Geopolitical conflict disrupted Russian gas flows to Europe, sending European natural gas prices tripling at their peak. Prices later collapsed as warm weather and full storage eased fears—even dipping into negative territory briefly.
Oil prices rose moderately overall: Brent crude ended near $84/barrel, up about 10% for the year. OPEC+ responded to recession fears with production cuts, while the U.S. released strategic reserves.
Highly leveraged long-term bullish views were tempered by near-term weakness, prompting Goldman Sachs to lower its short-term oil price forecast—though it remains constructive long-term due to underinvestment.
Cryptocurrencies: The Great Collapse
If other markets suffered, crypto imploded.
The year began with UST (Terra’s stablecoin) collapsing from $1 to $0.26, taking Luna to zero. Domino effects hit Celsius, Three Arrows Capital, Voyager, and BlockFi.
Bitcoin fell from nearly $69,000** to below **$18,000 by June. A brief recovery followed as Sam Bankman-Fried’s FTX positioned itself as a rescuer—until November, when revelations about Alameda Research’s insolvency triggered FTX’s collapse.
FTX filed for bankruptcy within days. Bitcoin plunged below $17,000, and confidence evaporated.
Experts like Mark Mobius predicted further declines into 2023, with Bitcoin potentially falling below $10,000.
Frequently Asked Questions
Q: Why did global bond markets fall so sharply in 2022?
A: Rising inflation forced central banks—especially the Fed—to hike interest rates aggressively. Since bond prices move inversely to yields, this caused historic losses across government and corporate debt markets.
Q: How did Turkey’s stock market rise while its economy struggled?
A: High inflation and currency depreciation made hard assets like stocks attractive hedges. Domestic investors poured money into equities as a way to preserve wealth amid lira depreciation and soaring prices.
Q: Was lithium’s price surge sustainable?
A: While demand remains strong, oversupply risks are emerging. Seasonal demand drops and increased production may pressure prices short-term, but long-term EV adoption supports fundamental strength.
Q: What caused the collapse of FTX?
A: FTX used customer funds to cover losses at its sister trading firm Alameda Research. When this became public, a run on withdrawals ensued, revealing massive liquidity shortfalls and leading to bankruptcy.
Q: Could the yen strengthen in 2023?
A: Yes. If Japan further adjusts or abandons YCC and global risk sentiment improves, capital could flow back into yen-denominated assets.
Q: Why did energy prices swing so wildly?
A: Supply disruptions from sanctions on Russia clashed with fluctuating demand due to economic uncertainty and weather patterns—creating extreme volatility in both oil and gas markets.
👉 Stay ahead of market shifts with real-time insights and secure trading tools.