We have collected some of the most significant news that impacted this particularly eventful year.
Inflation misery
High inflation just about underpinned every economic story in 2022.
Primarily kickstarted by rising energy costs, the trend originated in the dizzying days of 2020 as oil and gas projects were mothballed following a pandemic-induced slump in demand. The snapback that followed coincided with fiscal stimulus from governments and central banks, while consumer demand for electronics resulted in supply shortages and rising prices.
The result was startling.
By June, inflation in the US reached 9.1%[1] over the year – the largest increase in 40 years. Similar figures were seen globally. The result was the worst S&P 500 first-half loss since 1970,[2] trading down 20% from its record highs. Meanwhile, the ongoing cost of living crisis continues to ebb consumers’ spending power.
NASA DART mission
If you Google ‘NASA DART’, a small probe will knock the search engine display slightly off-kilter. In essence, that is what NASA’s asteroid-slamming mission achieved in September, albeit on a cosmic scale. The mission not only proved that humanity could avert potential asteroid-induced catastrophe but reaffirmed NASA’s status among the spacefaring heavyweights.
Now, NASA’s attentions are on returning man to the moon, but the importance of the DART mission cannot be understated. As NASA Administrator Bill Nelson said, with sincerity: “There is no doubt that 2022 was out of this world!”[3]
The European Space Agency is off to assess the damage the US caused (one million kilos of rubble, spread out over 6,000 miles) with its own mission scheduled to arrive in the system in 2026.
Morgan Stanley estimates that the roughly $350bn global space industry could surge to become the next $1tn sector,[4] presenting investors with the opportunity to go ‘to the moon’.
Russian invasion of Ukraine
In February, Russia escalated its eight-year conflict with Ukraine with a full invasion of the country, designed to knock out the capital Kyiv in a matter of days. The result: the largest refugee crisis in Europe since the Second World War,[5] and a devastating conflict nearing the one-year mark.
It is a war that has galvanised Ukraine’s Western allies into providing $84.2bn in financial humanitarian and military aid, as of August.[6]
Crypto crash
Trillions of figurative currencies no longer exist, the rags-to-crypto-riches tales of the pandemic months seem to be all but forgotten, and no one is quite sure if the blockchain’s biggest inhabitants will endure. In short, it wasn’t crypto’s year.
Stablecoins destabilised at the start of 2022, with subsequent crises continually scaling in magnitude and damage.
The troubles came to a head in The Bahamas with the collapse of crypto exchange FTX and the arrest of its head, Sam Bankman-Fried, known in celebrity circles as SBF. The SEC and the DOJ have taken up the case against FTX CEO SBF, with criminal charges and regulatory structures for the digital asset space a possibility.
All the while, many investors have seen their holdings evaporate over the year.
Sporting success
The hallowed phrase “past performance is not an indicator of future results” stood steadfast for many teams at this year’s men’s FIFA World Cup, with Brazil, Germany and Spain among the teams to fall short of their benchmark.
Italy’s failure to qualify would warrant regulatory scrutiny.
Morocco did almost as much as the host nation Qatar to put Arab football on the map, but it was Argentina and Messi that shifted the tilt of global footballing dominance back towards South America after decades of European domination.
There had to be a European winner of the Women’s EUROs though, with England defeating Germany in the final.
Elsewhere, tennis star Novak Djokovic was deported from Australia for not meeting Covid-related immigration rules, Beijing hosted the Winter Olympics, England won the Cricket T20 World Cup and Tom Brady retired from the NFL.
Finally, chess had a buzz about it when Magnus Carlsen accused rival Hans Niemann of cheating.
The business of sport means big money. Manchester United has been valued by its owners at £5bn[7] and is currently for sale if anyone’s interested, while the Premier League as a whole contributed £7.6bn to the UK’s economy in 2019/20.[8]
Twitter turmoil
In October, Elon Musk completed his acquisition of Twitter, having been steadily accumulating shares since the start of the year. An agreement for a full takeover had been put in place in April, valuing the social media platform at $44bn, with plans to turn the site into a bastion of online free speech.
Yet, three months later, Musk pulled out of the deal, arguing there were too many spambots on the platform. But with legal action brewing from Twitter, Musk completed the deal in late October, becoming CEO and kickstarting his ambitions of creating a multi-dimensional app in the style of China’s WeChat and QQ platforms.
Since then, half of all staff at the tech giant have been laid off, and more quit over an ultimatum to be “hardcore” workers or face the door.
The New York Times described the ordeal as “poorly handled”.[9]
Ask Musk, and he’ll say that the number of Twitter users is through the roof and the site is in a better place than ever, but many critics argue that Musk’s actions undermine the site’s long-term feasibility.
The takeover and his sweeping changes to Twitter offer a glimpse into the workings of the 21st century’s billionaire maverick. In his own words: “Some people use their hair to express themselves, I use Twitter.”[10]
In a recent development, users voted to oust Musk as CEO.
Could this give rise to the latest global social media platform? Some Twitter users have turned to Mastodon, while others are calling out for a new challenger to enter the market, presenting opportunities for social-savvy investors to identify the next big thing.
Iranian protests
In late 2021, protests broke out across Iran surrounding water shortages and the country’s worsening economic situation, but in September this year, the death of 22-year-old Mahsa Amini galvanised demonstrations across the country. She had been arrested for wearing an improper hijab in Tehran, and was severely beaten by security forces, resulting in her death.
Since then, more than 400 protesters have been sentenced to prison and public executions have been carried out.
At the FIFA World Cup, in a match against the USA, Iranian players refused to sing the national anthem – an apparent protest against the ruling regime. CNN reported that players’ families were later threatened by security forces.[11]
The tensions have created fears amongst global leaders as to the extent the Iranian regime is willing to go to suppress the protests.
Geopolitical risks can shape markets in a number of ways. Analysis by Schroders found a decrease in cumulative returns during geopolitical events,[12] but the protests in Iran are not on a scale comparable to other major events in the Middle East, such as the Gulf War or Iraq War.
AI goes mainstream
The true emergence of AI and machine learning has long been touted, but 2022 was the year those ambitions materialised. The launch of text processor ChatGPT and image generator DALL-E 2 caused a stir online as the fabled applications of artificial intelligence drew a step closer. Now, anyone can create images and text with only a few brief instructions made to an AI tool.
According to Deloitte, eight in ten executives already use some form of AI automation[13] but the latest developments mark a turning point in accessibility and usability.
In ChatGPT’s own words: “My emergence represents the latest advancement in the field of natural language processing, which has come a long way since the early days of simple rule-based systems. I like to think of myself as a digital wordsmith, using my advanced language processing skills to help people communicate more effectively.”
Investment in AI slowed in 2022, according to Air Street Capital,[14] but with the pace of innovation accelerating, it doesn’t take a computer to work out the potential the space offers. Keep an eye on AI developments in China – their institutions are producing 4.5 times as many research papers on the topic as the US.
Nuclear fusion
In what has been touted as a major scientific breakthrough, physicists in the US have overcome a major barrier in obtaining near-limitless clean energy. The question now is how close are we to a fusion-powered future?
The energy generated from the experiment was tiny, but its significance could be huge in the broader shift away from fossil fuels. Net zero ambitions are built on the assumption that new environmentally friendly technologies will be available by 2050, and fusion energy is a vital cornerstone of that.
In practice, scientists heated a capsule the size of a pea to 100 million degrees Celsius, but attention is now fixed on when and how the technology can be made commercially viable.
Should nuclear fusion become feasible, the global energy market will be turned upside down with an inevitable demand for materials, expertise and technology set to follow, presenting opportunities for investors to capitalise on the next wave of infrastructure projects.
[1] https://www.bls.gov/opub/ted/2022/consumer-prices-up-9-1-percent-over-the-year-ended-june-2022-largest-increase-in-40-years.htm
[2] https://markets.businessinsider.com/news/etf/s-p-500-posts-worst-first-half-loss-since-1970-what-it-means-and-what-could-be-next-1031564023
[3] https://www.nasa.gov/press-release/nasa-s-big-2022-historic-moon-mission-webb-telescope-images-more
[4] https://www.morganstanley.com/Themes/global-space-economy
[5] https://english.elpais.com/international/2022-03-03/ukrainian-exodus-could-be-europes-biggest-refugee-crisis-since-world-war-ii.html
[6] https://www.ifw-kiel.de/publications/kiel-working-papers/2022/the-ukraine-support-tracker-which-countries-help-ukraine-and-how-17204/
[7] https://www.skysports.com/football/news/11096/12754038/manchester-united-up-for-sale-who-are-the-contenders-to-take-over-from-the-glazers-and-when-could-a-deal-be-done#:~:text=Their%20takeover%20has%20cost%20the%20club%20more%20than%20%C2%A31.5bn.
[8] https://www.premierleague.com/news/2434933
[9] https://www.nytimes.com/2022/11/04/technology/elon-musk-twitter-layoffs.html
[10] https://twitter.com/elonmusk/status/1112530378915405824?s=20&t=w7y6XER3_qmYgjDcfr2_mA
[11] https://edition.cnn.com/2022/11/28/football/iran-soccer-family-threats-intl-spt/index.html
[12] https://www.schroders.com/es/be/professional-investor/insights/markets/what-the-return-of-middle-east-tensions-could-mean-for-markets/
[13] https://www2.deloitte.com/us/en/insights/focus/technology-and-the-future-of-work/intelligent-automation-2020-survey-results.html
*As with all investing, financial instruments involve inherent risks, including loss of capital, market fluctuations and liquidity risk. Past performance is no guarantee of future results. It is important to consider your risk tolerance and investment objectives before proceeding.
