Macro Analysis /

Top 10 shocking moments of 2022

  • After the end of two years of Covid lockdowns, central banks predicted only transitory inflation

  • Meanwhile Russia’s invasion of Ukraine and supply chain disruptions caused huge market volatility and dented valuations

  • Tellimer's CEO Duncan Wales selects the ten most shocking moments of the past year

Top 10 shocking moments of 2022
Duncan Wales
Duncan Wales

Chief Executive Officer

Tellimer Research
27 December 2022
Published byTellimer Research

There are some bright spots and opportunities ahead, as you can see from our predictions of what may come in 2023 in our latest research (see here).  However 2022 turned out to be a bit of a shocker, on a number of fronts. This is my – slightly wry – list.   

I and the whole team at Tellimer appreciates your support and professional comradeship as we collectively navigate our way through the fascinating, complex and diverse Emerging Markets that we come from and participate in. 

Wishing you all the best for the festive season and a happy, healthy and profitable 2023!

1. Russia's invasion of Ukraine

On 24 February, Russian troops mounted a full-scale assault on Ukraine from multiple points on the Russian and Belorussian borders. It triggered the biggest conflict in Europe since 1945, with the most troops and territory involved, and tragically already the most causalities. With the US and NATO backing Ukraine, and Iran and (sometimes) China backing Russia, nearly a year later the destruction is still grinding on.

“Can a nation be free if it oppresses other nations? It cannot.”

Vladimir Ilyich Ulyanov (better known by his alias, "Lenin") 1870-1924

I say the invasion was shocking, but the Western powers knew it was coming: President Putin is nothing if not consistent. Russian troops fought bloody battles in Grozny to prevent Chechnya seceding from the Russian Federation in 1999/2000; in 2008, Russia invaded Georgia and annexed South Ossetia and Abkhazia; Russia annexed Crimea in 2014, and destroyed Aleppo and other towns in Northern Syria in order to prop-up the Al Assad regime in 2016. Russia has been at war for much of President Putin’s time. The military position looks un-winnable for both sides in Ukraine: global power politics and diplomacy timed around battlefield successes/failures will get much more important from here on.

2. Europe's hottest summer, ever

In the snow, wind and rain, it is easy to forget that London and large parts of Western Europe had some +45C days in the summer, which broke all records. Bushfires ran out of control, thousands of vulnerable people died, and crops were destroyed. One Sunday in July, I was helping out at a summer fair, de-rigging a commercial stand in a field for a friend: the grass was turned to dust, and a hot wind blew great swirls into our faces and dulled the green of the surrounding trees. We poured sweat as we worked and were grimed in filth. It made the beautiful British countryside, which is usually so temperate and green, unpleasant to be in. We wished we were in energy-sapping and eco-unfriendly air-conditioning. Rather more significantly it damaged grain crops in Ukraine and Russia and added yet more pressure to global inflation, and once again led to destructive floods in Pakistan. Another uncomfortable reminder of climate change and its multiple consequences. ESG may not be "a thing" because the underlying issues are so broad and diverse, but the significance of the ESG investment agenda in all areas of the economy will only accelerate from here.

Air temperatures in July 2022

Source: NASA

3. Inflation: Central banks asleep at the wheel

A year ago, the US Federal Reserve, the European Central Bank and the Bank of England were all telling us that inflation was a brief and transitory side-effect of two years of Covid lockdowns. They raised interest rates from their historically low levels gingerly and slowly as a result, confident that it would all be over soon. Accelerated by the conflict in Ukraine, inflation rapidly rose across nearly all economies to double digits for the first time in decades. The central bankers still didn’t react. Eventually panic set in as central bankers realised that they had to do something more radical in May 2022: the Fed started raising 0.75% each month until December, where the rate was raised by only 0.5% to 4.5% (up from 0.25% a year ago). My assumption is that the Fed – which everyone else has to follow – will only really stop raising interest rates when it sees a painful and significant increase in unemployment.

Inflation by country, October 2022 (end of period CPI)

IMF Inflation map Source: IMF

4. FTX and the Crypto implosion

In some ways it is a surprise that it took so long for crypto to have a good old fashioned banking-style scandal. In November, one of the two largest crypto exchanges in the world, FTX, which had been valued at US$32bn not long before, imploded in a huge corporate ball of insolvent flame. The 30-year-old founder and former CEO Sam Bankman-Fried is accused of using clients funds to fuel his own trading firm, Alameda. If proved, this is the oldest trick in the book: get people to deposit or invest with you and use the money to trade on your own behalf at their cost and risk.

Mr Bankman-Fried, some of his fellow executives and FTX itself also donated an extraordinary US$70mn to various US politicians, and Bankman-Fried was second only to George Soros in donations made to the Democratic party. It is no surprise that he swiftly became the poster boy for crypto in Washington DC, appearing as an expert in a number of Congressional hearings, typically advocating light-touch regulation for crypto. It is a sign of maturity that crypto has suffered this type of disaster; if anything bringing structured regulation to crypto – which may take time but now seems inevitable – will make it more viable for the wholesale financial services mainstream.

5. The reversal of Roe vs Wade by the US Supreme Court

Whatever one's belief about the rights and wrongs of the case, it was still a surprise that the US Supreme Court reversed a decision in favour of women’s rights made more than 50 years before (in 1969). In that seminal case, a 25-year-old single woman in Texas (anonymised at the time as "Jane Roe", the feminine equivalent of "John Doe", which had been used in British legal actions where the defendants name was not known from as early as the 18th Century; Wade was the DA for Dallas) claimed that she should be allowed to terminate her pregnancy on the grounds that she had been raped. The original Supreme Court judgement came too late to prevent the birth of the unwanted child, but effectively gave women in the US the absolute right to abortion in the first trimester of their pregnancies; very much in line with the rest of the world’s developed economies.

The recent reversal of that right in Federal law has left the US at odds with most other modernised nations and with a patchwork of different laws in different US states. It feels like a symptom of the polarisation of US politics and society in recent decades. The US political and constitutional system, which has been a global flagship for more than a century, is now under strain in a way that it has not been since its modern re-inception in the 1860s.  

Abortion rights around the world

World map of abortion rightsSource: Center for Reproductive Rights

6. The Death of Queen Elizabeth II

It wasn't a shock – the late Queen was 96 years old – but the ending of the Elizabethan Age, with all its triumphs and tragedies, felt like a real moment in history: a pivot in to a new world that will be very different from what came before. The late Queen's husband, HRH The Duke of Edinburgh, fought with distinction in WWII, she served herself, two of her uncles were killed while serving (one in each war), and another uncle was murdered by the Provisional IRA (there are many IRAs, as is often the case with extremists, they fall out with each other regularly and easily). The Queen’s work schedule was relentless and she had limited right of reply to criticism. She died in Scotland, which seemed like an elegant reminder of the unique and positive characteristics of the United Kingdom that she vowed to defend.

The 20th Century was a very different place, and HM The Queen displayed the best qualities of its inhabitants: selflessness, care for others, stoicism, physical and moral bravery, aversion to showing off or self-obsession and a sense of humour. None of these qualities are in fashion at the moment.

7. The assassination of Shinzo Abe

Japan's former Prime Minster, the great moderniser Shinzo Abe, was assassinated on 8 July. Abe was credited with kick-starting Japan out of stagflation with reflationary policies combined with greater government spending and economic competitiveness (the so-called "Abenomics"). He was also wary of a resurgent China and urged Japan's rearmament as a priority, in a rejection of constitutionally imposed post-war pacifism. His policies led to Japan having its first operational aircraft carrier since the end of the Second World War, JS Izumo, which earlier this year conducted exercises with US Marine Corps F-35B’s roaring on and off its deck. With China in the ascendancy, history will likely see him as a leader of vision and master of grand strategy.

US F-35B landing on JS Izumo

F-35B landing on JS Izumo

Source: United States Marine Corps

8. Liz Truss becomes UK Prime Minister

Yes, a truly 'WTF' moment for anyone who had ever seen or met hapless Liz Truss, or heard her speaking about cheese markets. We are now all used to seeing politicians thrown in to jobs they are wholly unqualified to do (that's how democracy works for career politicians), but Ms Truss was an Olympian example of unsuitability for high public office. A senior civil servant contact of mine described her – before she was even a candidate for PM – as having the reputation within Whitehall of being an "unguided missile": how true that proved to be. Thankfully Ms Truss – who created economic chaos within weeks – lasted less time in office than the duration of a wet lettuce, literally.

9. The Soviet Union's last General Secretary

Those of us who lived through any part of the Cold War era will remember the world-changing impact of the last Soviet leader, Mikhail Gorbachev, who died in August at the age of 91. Before his premiership, the USSR was hostile and fearsome nuclear power, able to destroy the world from the other side of the "Iron Curtain" and engaged in dangerous espionage and wars via proxies. By the end of Gorbachev’s time the Soviet Union and its communism-in-one-country experiment was ended, the Cold War was over and such was the sense of the significance that American thinker Francis Fukuyama predicted that liberal, enlightened capitalism was now accepted as the only really fair way to run society – what he described as the "end of history". We all felt that nuclear Armageddon had been averted.

Although much of what Gorbachev achieved has now been undone by the chaos of the USSR's collapse in the 1990s and the actions of President Putin, he still ranks as a great man to me.

And finally...

10. Nuclear fusion works! Sort of...

Albert Einstein originally predicted that mass can be converted in to energy (the famous equation E=mc2) either by the division of atomic particles (nuclear fission: think nuclear power stations and bombs) or the combination of two particles (nuclear fusion – the creation of a new element: think the power that runs the sun and the stars). We know the former has been possible on Earth, for good and ill, but nobody has successfully managed the latter.

That is, until two weeks ago scientists at the California-based National Ignition Facility (NIF) claimed that they have generated more energy by combining atomic nuclei than the energy used to power the process. It does sound exciting and a potential near-limitless and pollution-free solution to the world’s energy problems.

However, as I understand it, the NIF team had to heat up two hydrogen isotopes (deuterium and tritium) to a temperature of 3 million degrees Kelvin with 192 massive lasers to encourage them to meld in to a single atom of helium, thereby releasing one neutron and some new energy. 3 million Kelvin is nearly 3 million degrees Centigrade, which is hotter than the surface of the sun (in fact it is like the warmer parts of the sun, but not the maximum high pressure center, which could be as much as 27 million Centigrade). Anyway, it is quite hot, and most things on earth (like potential fusion power stations) tend to melt or vaporise if you subject them to that sort of heat. And, if you include the energy needed to heat up the 192 lasers, the whole equation then becomes energy negative. It is an interesting breakthrough, but given some of the obvious practical issues, nuclear fusion power seems some way off. In the search for sustainable energy we should prioritise wind, wave and solar for the time being, perhaps.

This "Perspective Pool" report was first published on Scriber – the publishing, analytics, and subscription management tool for investment professionals.

Related reading:

Wake-up call for the West: While Russia fights, China prepares for war

The global food war

The most dangerous moment in human history

The Tri-Polar World and why the West rules, for now