The stock market year of 2022 is nearing its end, a year that investors already want to forget. With a joint fall in stocks, bonds and cryptos, it is indeed the worst year for the stock market since 2008. On the other hand, is there a small hope of a rally at the end of the year to restore balm to the heart? ?
The end-of-year rally, a concept between myth and statistical reality
The end of year celebrations are very close, the spirits rejoice and the pair volatility/trading volume begins to decrease significantly on the stock market. For investors and traders on the financial markets, this period gives the starting point for a retrospective, a review of the past year, to better project themselves on the major trends of next year.
What to remember from this year 2022 on the financial markets in a few words? It is one of the worst years since the 2008 financial crisis with a joint fall in stocks, bonds and cryptos, a double digit fall for these three asset classes.
The bear market of the year 2022 is first of all that of the vertical rise in interest ratesa tool used by Central Banks to reduce public enemy number one, namely inflation. This drastic tightening of financing and liquidity conditions led to the worst bond crash since the 2008 financial crisis as well as a 25% drop on average (according to the major Western stock market indices) in stock market shares.
For the crypto market, the note is much saltier with a 65% drop in the price of bitcoin this year and a division by three of institutional participation according to the measure of asset under management (aum) of large ETF-type funds.
Long penalized by cross-asset correlation factors (in particular the rise of the US dollar on Forex, the floating exchange market), the crypto market has suffered since November an endogenous crisis of confidence vis-à-vis centralized platforms.
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To end the year, the equity market seems able to breathe a little with a clear technical rebound in the CAC 40 and S&P500 indices since Wednesday’s trading session. The CAC 40 price thus respects its seasonality, which gives it a positive average performance at the end of December, a statistical fact that is often referred to as the Christmas rally. On the other hand, this statistical fact does not concern the crypto market.
Chart showing the average performance of the CAC 40 for each trading week in December since 1987 (source, Vincent Ganne)
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Bitcoin, a year 2022 to forget, the worst in 10 years on the stock market
Let’s go back to the course of bitcoin for which we saw above that it was down 65% this year and more than 74% since its old historical record (the latter dates back to Monday November 8, 2021).
This year 2022 is definitely to be forgotten for Bitcoin because it is, by some measures, the worst in 10 years. I again turned to seasonality data (the average stock market performance over a period of time) and here is the clear conclusion: the year 2022 is the first year in 10 years with 4 consecutive quarters of negative performance for the BTC.
So here is my conclusion: Hurry up 2023! My conviction is indeed that this new year will be the year of the revival of the long-term bull market. Until then, I wish you all a Merry Christmas.
Chart showing the average quarterly performance of bitcoin prices since 2013 (source, Coinglass)
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