The market capitalization of the global stock market declined 20% in 2022, wiping off about $25 trillion from the market, the World Federation of Exchanges (WFE) disclosed in its latest report released on Friday. In addition, the value of the market decreased by 10% last year, the report noted.

Both declines contradict the positive momentum gained two years earlier, WFE, a group that represents exchanges and central clearing counterparties, pointed out. However, despite the drop in market cap, global volumes jumped 5% in 2022, which was pushed by increases across all regions.

“2022 recorded the highest global volumes in the last six years (48.32 billion trades) and the highest regional volumes during the same period: the Americas (13.44 billion trades), APAC (31.13 billion trades) and the EMEA region (3.74 billion trades),” WFE explained in the report.

‘Perfect Storm of Negative Pressures’

According to WFE, a number of factors contributed to the slump in the market cap of last year. This includes the capital injection in the aftermath of the COVID-19 pandemic and the resultant inflation powered by high consumer demand. In addition, supply constraints worsened by the Russia-Ukraine war and the sanctions against Russia contributed to the situation by increasing energy prices, especially in Europe.

“China’s renewed Covid lockdown, with stringent measures enforced for most of the year, strained the global supply chain, increasing prices of imported goods,” WFE noted.

The industry group further noted that investment slowed down in the equity market as a result of the high inflation environment and the tightening of monetary policies which fueled raising interest rates across most economies.

“We witnessed a perfect storm in 2022 of so many negative pressures culminating to bring immense pressure on global stock markets, as our report highlights,” Nandini Sukumar, the Chief Executive Officer at the WFE, noted.

Derivatives Return Good Numbers

However, despite the gloomy figures, WFE’s data shows that exchange -traded derivatives, which included both options and futures contracts, surged by 34.4% year-over-year, reaching their highest level in six years. The volume of contracts amounted to 84.76 billion derivatives contracts, with 56.17 billion attributable to options and 29.59 billion to futures.

“Commodity derivatives were the only product line whose overall volumes (that is, considering both futures and options) declined in 2022 (-14.5%), while equity, currency, and ETF derivatives volumes witnessed double digit increases (48.4%, 48.2%, and 36.9%, respectively),” the report explained.

ETF Volume Jumps in 2022

Furthermore, WFE data shows that while the number of listed exchange-traded funds (ETFs) rose only 5% year-over-year, the value of traded ETFs jumped by 32.2%, pushed by increases from every region of the world. Additionally, the number of listed securitized derivatives rose slightly by 2.6% year-over-year. On the contrary, the value of traded securitized derivatives slumped 21.6% year-over-year due to decreases in every region.

WFE added: “The number of listed investment funds (IF) fell year-on-year (-6.1%) while the value traded increased 12.5%. EMEA region recorded declines in both the number of listed investment funds and in value traded, while in the Americas both changes were positive. The APAC region recorded the largest drop in the number of listed funds and the largest increase in value traded.”