The 2022 stock market year is coming to a close, a year that investors are already eager to forget. With a simultaneous drop in stocks, bonds, and cryptocurrencies, it has been the worst stock market year since 2008. However, is there a small hope for a year-end rally to lift spirits?
The Year-End Rally: A Concept Between Myth and Statistical Reality
The end-of-year holidays are fast approaching, spirits are rejoicing, and the volatility/volume trading pair is starting to significantly decrease on the stock market. For investors and traders on financial markets, this period marks the start of a retrospective, a year-end review to better project the major trends for the coming year.
What can be said about this 2022 year on financial markets in a few words? It is one of the worst years since the financial crisis of 2008 with a simultaneous drop in stocks, bonds, and cryptocurrencies, a double-digit drop for these three asset classes.
The bear market of 2022 is first and foremost the result of the vertical rise in interest rates, a tool used by central banks to reduce the number one public enemy, inflation. This drastic tightening of financing and liquidity conditions has resulted in the worst bond crash since the financial crisis of 2008, as well as a 25% average drop (according to major Western stock indices) in stock prices.
For the cryptocurrency market, the note is much saltier with a 65% drop in the price of bitcoin this year and a threefold decline in institutional participation, according to the measure of asset under management (AUM) for large ETF-type funds.
Long penalized by cross-asset correlation factors (in particular, the appreciation of the US dollar on the Forex floating exchange market), the cryptocurrency market has been suffering since November from an endogenous crisis of confidence in centralized platforms.
To end the year, the stock market seems able to give itself a little breathing room with a clear technical rebound in the CAC 40 and S&P500 indices since Wednesday’s stock market session. The CAC 40 price therefore respects its seasonality, which gives it an average positive performance at the end of December, a statistical fact that often goes by the name of the Christmas rally. On the other hand, this statistical fact does not concern the cryptocurrency market.