Challenging market environment, high volatility

After a promising start, 2022 presented significant challenges to capital markets throughout the world.

The main negative factors were the war in Ukraine and the sanctions imposed as a result, the energy crisis exacerbated by the war, the sharp rise in inflation and the associated interest rate hikes by the central banks. These were compounded by recession concerns and ongoing supply chain problems.

With economic growth of 5.1 per cent in 2022, Austria left the eurozone behind, whose GDP grew by a total of 3.5 per cent in the same period. A significant slowdown in growth momentum is expected in 2023: Experts are currently predicting a rise of just 0.5 per cent for Austria and 0.9 per cent for the eurozone.

Equities fell around the world in 2022

With the exception of commodities, virtually all asset classes ended 2022 with losses, some of them significant. What is unusual here is that both equities and bonds lost value. Global share prices were already seeing strong fluctuations shortly after the beginning of the year in the wake of the Russian attack on Ukraine. In view of the general uncertainty, many investors switched from equities to government bonds and investments in gold.

As a result, all major stock indices worldwide fell. At the end of February 2022, for example, the DAX suddenly plummeted by around 8 per cent as the war broke out. Having risen by 15.8 per cent in the previous year, the German leading index lost 11.4 per cent of its value in the course of 2022. Even in 2020 – the year of the coronavirus crisis – the DAX had only declined by 3.7 per cent. The TecDAX technology index also fell by almost a quarter in 2022. In 2020 and 2021, the global stock markets were still growing on the back of strong economic data, rising corporate profits and improving labour markets. Austria’s ATX also recorded heavy losses in 2022, falling by more than 19 per cent over the course of the year. Like all European stock markets, Vienna’s leading index was reacting to the significantly less favourable macroeconomic and geopolitical environment.

Rising inflation and higher interest rates in the eurozone

The eurozone inflation rate followed a steady upward trend in 2022: A rate of more than 4 per cent in December 2021 contrasted with a remarkable inflation figure of 8.4 per cent at the end of 2022. Inflation peaked in the USA in June at 9.1 per cent and in the eurozone in October at 10.7 per cent.

As a result, almost all central banks worldwide were forced to change their strategy. The US Fed is a few months ahead of the Europeans in terms of the inflation and interest rate cycle. Starting from a level of de facto zero, the Fed increased its interest rates to 4.5 per cent in the course of the year, while the ECB stood at 2.5 per cent at the end of 2022. The result was a sharp decline in bond prices, as new issues promised investors significantly higher interest income.