Rising Rates and Falling Tech Lead Wall Street to Close Worst Year Since 2008 | Economy


An operator, this Friday during the last session of the year on Wall Street (New York).TIMOTHY A. CLARY (AFP)

Rising interest rates to tame inflation, collapsing cryptocurrencies and a gloomy outlook for tech companies, which announced mass layoffs, have contributed, among other things, to making 2022 the worst year in history. Wall Street since 2008, that of the Great Recession. Fear of a recession in 2023 if the rise in the price of silver cools the economy too much has kept investors away, although some analysts dare that the market will tend to be bullish next year, albeit with ups and downs.

The Dow Jones Industrials, which includes the 30 largest companies in the country, has lost a cumulative 8.8% this year. The selective S&P 500 fell more steeply, losing nearly 20 points, and the tech-heavy Nasdaq beat worse expectations, losing 33%. After more than two years with the wind in its sails due to the pandemic, which instituted remote working and gave wings to digital entertainment, technology companies and their flourishing trail of startups face 2023 with bleak forecasts. Among the big ones, the hits of Tesla, which lost 65% of its stock market value, and Meta, 64%, stand out.

After a banner year for stocks in 2021, in which the S&P 500 hit back-to-back highs, few anticipated the fall that would come this year. Sell ​​orders were the general trend, a trend that was not even able to overcome the wave of buying in the last hours of Friday’s session. The Nasdaq 100 also closed lower, losing a third of its value in 2022, as tech stocks were particularly vulnerable to rising rates. It was also the worst year in more than a decade for equities and fixed income, and a particularly volatile period for commodities. However, the dollar appreciated against other currencies, in particular against the euro.

The only sector that catapulted to green was energy, with a 56% rise supported by rising oil and gas prices following the war in Ukraine. Despite the revenue it has brought to shareholders, energy, along with food, has been responsible for runaway inflation this year in the United States at its highest level in four decades.

The Twitter controversy and the bankruptcy of FTX

Inflation, which for much of 2021 was considered a transitory phenomenon by the Federal Reserve – a miscalculation that even Fed Chairman Jerome Powell has acknowledged – has taken hold in 2022. , peaking at 9.1% last June, and in March forced the central bank to raise rates, which were frozen at around 0% during the pandemic to prevent the economy from derailing. After three consecutive 0.75% basis point hikes, the Fed moderated the pace in December, rising just half a percentage point, but forecasts for 2023 do not rule out a cooling in the labor market, with rising unemployment and ultimately a recession that many analysts place in the second half of 2023.

Factors such as the change in ownership of Twitter, with the noisy entry of Elon Musk in October, after which the company went public, and the fraud of the cryptocurrency firm FTX have particularly shaken the foundations of Wall Street. , in case the year it was not to have been inherently restless. The wave of massive layoffs announced by Musk after landing on the social network, which he acquired for 44 billion dollars, had widespread aftershocks in large technology companies like Meta, Amazon, Google, Microsoft or Netflix, which have also frozen hiring. The change in consumer habits after the pandemic has significantly reduced the benefits of these companies.

2022 was also the year the bubble burst crypto. The decline was driven, among other factors, by the FTX platform scandal, one of the most serious in decades, and the arrest and indictment of its founder, Sam Bankman-Fried, for fraud. FTX filed for bankruptcy in November. Bitcoin, the most widely used cryptocurrency, has lost 65% of its value this year, in addition to attracting growing rejection for its environmental impact. In a pioneering move, New York in November became the first state in the country to ban fossil fuel-powered cryptocurrency mining.

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