Takeovers, Economic Unrest, And Crypto Currency Crash
Investors have had their hands full with 2022. A few notable events from the year include Elon Musk’s purchase of Twitter, a violent bear market, record-high inflation, hawkish central banks throughout the world, Russia’s invasion of Ukraine, the collapse of crypto currencies, and record-high inflation.
The best word of the year in 2022 may be attributed to Elon Musk. The phrase “poison pill” refers to a defensive tactic employed by public company boards to thwart activist investors, rivals, or other potential buyers from seizing control of the business by amassing significant stock holdings. Musk made a non-binding bid to buy Twitter at $54.20 a unit on April 14, 2022. The board of Twitter first used the “poison pill” tactic to stave off an assailant takeover. The board finally gave up, and Musk was able to catch the blue bird.
Since rising interest rates and persistently high inflation are typically a formula for a recession, this term has been on everyone’s lips in 2022. A severe, widespread, and protracted decline in economic activity is referred to as a recession. Around April 5, 2022, Deutsche Bank made the first big bank prediction that the US economy will experience a recession, and soon after, the herd followed suit. Expect this word will be widely used in 2023 based on current economic predictions.
One more phrase that became popular because of Musk and Twitter. On April 14, 2022, Musk made an unsolicited offer to purchase Twitter. This is known as a power grab, which is when a firm is acquired by another against the intentions of the first. Despite the possibility of the abovementioned poison pill by Twitter’s prior board, Musk ultimately triumphed.
Bears grabbed the spotlight and although 2022 was the year of the tiger. Bear markets were unrestrained, devouring risky assets like bonds, crypto currencies, and even stocks. Many predicted this when the S&P 500 rose by 100% between 2018 and 2021, however the 20% or more dips throughout capital markets—the sign of a bearish trend nonetheless
This year, as a result of crypto currency investors’ reactions to internet reports of massive digital asset breaches, cold stores and cold wallets grew highly popular. For instance, $570 million was stolen in an attack on the Finance exchange in October 2022. The crypto trading FTX then filed for bankruptcy on November 11, 2022, after freezing the assets of its clients. And over $600 million in investor funds that were kept in FTX wallet and the exchange were stolen on the same day. Digital wallets known as “cold wallets” are not linked to the internet, making them less susceptible to online system breaches and failures.
The word “federal funds rate” refers to the Open Market Operations Committee’s (FOMC) target interest rate, which is the rate during which commercial banks overnight lend and borrow each other’s excess reserves. The FOMC declared that the federal money rate will increase by 75 basis points on June 15, 2022, the largest increase since 1994. In 2022, it increased the federal funding rate by another 75 percentage points three more times, and it still doesn’t seem to be done. Many small investors, who are now seeing how the Fed determines money supply and how it effects their own pocketbook, are unfamiliar with this climate of rising rates.
Capitulation is the equivalent of giving up. When many investors sell their holdings in a short amount of time due to fear, the price of the asset or market drops significantly amid a high volume of trade. This is referred to as capitulation in the investment world. Major U.S. stock index had severe falls early on January 24, 2022, which increased concern of a broader market meltdown. According to statistics from multiple internet brokers, even though the S&P 500 lost up to 25% of its value from its peaks this year at its worst point, most investors didn’t truly give up as they did in previous bear markets.
The term “gilts” refers to government bonds that are the counterpart of U.S. Treasury securities in the United Kingdom, India, and numerous other commonwealth nations. The price of British government bonds, or gilts, fell the most on September 22nd since the COVID-19 crisis began in March 2020, when then-prime minister Liz Truss tried to forward an economic plan of tax relief against raging inflation. She was had to abandon her plan and dismiss her minister of finance, and the error ultimately lost her the position.
Petrodollars are foreign exchange earnings from the export of crude oil. Russia’s invasion of Ukraine on February 24, 2022, helped raise crude oil prices in the spring to more over $125 per barrel. The average price of standard grade gasoline in the United States then reached a record high of $4.43 per gallon, according to the EIA, on March 14.
All year, the word “inflation” was often used, especially as the yearly rate of inflation reached a 40-year high. Core inflation, which excludes the food and energy sectors, is the change in prices for goods and services. This formula does not include food or energy costs because they are too unpredictable or subject to dramatic price swings, as we experienced in 2022. The Bureau of Labor Statistics published the Consumer Prices Index (CPI) data for May 2022 on June 13, 2022, and it indicated that despite recent Federal Reserve interest rate increases, core inflation in the United States remained over a 6% year-over-year change. Overall inflation is above 6% as of publishing.
There are always a lot of phrases that are popular at certain times or that receive a lot of interest year-round but don’t make our list of the top 10. The six special mentions for 2022 are as follows:
Although inflation was one of the most frequently searched concepts on Investopedia this year due to the significant spike in prices that dominating headlines, it lagged behind its cousin, core inflation, which excludes costs for things like food and gas.
Money laundering: The bankruptcy of crypto currency broker FTX probably increased awareness of this illegal practice, especially after we discovered about the company’s peculiar connections to Alameda Research, an investment company it also controlled.
Environmental, Social, and Governance (ESG) Criteria: ESG criteria are frequently used on our site, although perhaps not for the right reasons in 2022. Many investors doubt the validity of ESG investing in light of allegations and investigations into going green on the side of some asset managers.
The Wash-Sale Rule is a legal concept that consistently surfaces during weak economies, and 2022 wasn’t any different. Investors can be tempted to dispose of losing equities before the end of the year, claim the tax credit, and then buy those stocks again at lower prices inside thirty days, but the IRS’s Wash Sale Rule forbids that.
DCA: Dollar-Cost averaging this year saw a lot of interest in one of the fundamentals of wise long-term investment, which is always encouraging. 2022 was a wonderful year for investors to keep purchasing and decreasing the average share price of preferred firms as the bear market slashed stock prices across many highly valued industries.
Treasury Inflation-Protected Securities (TIPS): In 2022, TIPS had a brief period of popularity as investors searched for any investment that may provide even a sliver of protection against inflation. Before improved rates spread throughout the bond market in 2022, TIPS provided that function for a few months.