Ranking of financial markets in 2022. My observations
To help me track financial markets in a customized format to my liking, I developed websites(1, 2, 3, 4, 5) available for free on this blog.
Here are the results for 2022.
The ranking of the stock indices is adjusted to USD. An investor can make good gains but the gains can be lost from a depreciating currency. Investors cannot ignore currency movements. Ignoring them will lead to a distorted reflection of the purchasing power made from their investment gains.
2022 has been a sea of red for stocks worldwide, as can be seen from the year-to-date performance of global stock indices. It is an achievement if you managed to break even this year in your stock portfolio.
Straits Times Index(STI) is the pride of Singapore in the terrible bear market of 2022. STI is ranked 3rd in 2022, though the 4.77% annual gain is not impressive considering the risk involved. Today, one can easily get almost risk-free gain of above 3% from 12-month bank fixed deposits and Singapore Savings Bonds.
The number one stock index performer goes to Turkey's Borsa Istanbul 100 which gained 111% USD-adjusted. It gained almost 200% in nominal terms. One distinguishing feature in Turkey's economy in 2022 is high inflation and tumbling currency. Inflation reached as high as 85.5% and the currency tumbled 29% against USD. I think the strong stock market gains were strongly driven by Turkish investors using stocks to protect against the ravages of high inflation and a weak currency.
The worst-performing stock indices in 2022 are related to technology stocks. The worst 2 are Chi-next(tech index of China) and Nasdaq100(tech index of U.S). Bottom 3rd and 4th are Korea's Kospi200 and Taiwan's TSEC weighted index. Korea and Taiwan are countries strong in technology product exports to the rest of the world.
USD was already strong last year (2021) and its strength continued into 2022. 2022 is the year of the U.S. dollar, thanks to the Federal Reserve's moves to raise interest rates aggressively to fight inflation. The onslaught caused most currencies to depreciate against the USD in 2022 except commodity-based currencies and the Singapore dollar. Like Straits Times Index, the Singapore dollar(SGD) made Singaporeans proud again. Singapore is the only country with no commodity export that has an appreciating currency against the USD in 2022.
Singapore does not set its own interest rate. The central bank, MAS, relies on fixing the exchange rate to fight inflation and it did well. With Singapore's strong reserves, I am confident SGD should be one of the stronger currencies that can weather the onslaught of a strong USD.
Japanese Yen was weak last year (2021) and its weakness continued this year. Last year, it dropped 11.47% against USD and it continued to tumble 12.2% this year. It used to be a safe haven currency which will rise in a bearish year for stocks like 2008. This year, it did the opposite. The weak Yen should make Japan a cheaper place for tourists to visit.
Besides enjoying a relatively strong stock market and currency in 2022, Singapore's housing market defied the global real estate downturn caused by soaring mortgage rates. This is despite strong, consistent government measures in the form of taxes and lending restrictions over the years to curb rising property prices.
While it is impressive that the major asset classes such as stocks, currency and real estate in Singapore have done relatively well in bearish 2022, I would rather see the Singapore property market tumble from the top rankings. This is nothing to be proud of. High property price is a major cause of the high cost of living in Singapore. It imposes a high social cost on young people and young couples. High mortgage debt and unaffordable housing cause youngsters to lose hope for the future. It discourages them to have kids and the sense of hopelessness may cause some of them to lie flat. People who lose hope for the future stop working hard.
I do not think rising property prices are a good thing. The real estate investment gains enjoyed by the older generation are offset by the higher cost of living imposed on the younger generation. Young people are our future and if they feel bleak about the future, we have no future. Although I am not affected by rising property prices as a property owner with no mortgage debt, rising property prices will still affect me. When my kids grow up and they struggle with rising property prices, their problem will become my problem.
I expect high property taxes and lending restrictions on property purchase in Singapore to continue as the government is aware of the social cost caused by high property prices.
2022 was a good year for commodities. Unfortunately, this was a major factor that contributed to inflation. Energy prices made good gains in 2022 with brent oil rising 35%. What is interesting is how much energy prices have come down from the 52-week high. Oil prices have slid more than 22% from the 52-week high. Natural gas prices are down more than 58% from 52-week high! Energy commodities are already in a bear market. This is telling us that commodity prices are finally coming down as a result of the slowing economy squeezed by high interest rates. This is a sign that inflation may be coming down.
Cryptocurrencies are in a sea of deep deep red in 2022. The top-performing major cryptocurrency is TRX and it is down by 28%. The rest of them are down by more than 50%! I myself had narrow escapes with crypto investments (Anchor/UST, Hodlnaut, FTX) that caused almost 100% loss to investors who did not exit in time.
I believe the asset class that caused the most damage to investors, especially big institutional investors, in 2022 are fixed income long-term government securities.
Ironically, the 20+ year Treasury bond which is supposed to be risk-off fell more than risk-on S&P500 during Oct.
This asset class is a strange world to me. It moved from a strange world of negative yield to another strange world where risk-off assets(Treasuries) lost more money than risk-on assets(stocks) in a risk-off year. I cannot comment much on a world which I find strange.
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