Top 10 important events in world markets of past decade
The past ten years, from 2010 to 2019, were not bad for investors with a long-term strategy. The indices were growing, sometimes at a record pace, but the process can not be called a soft ride. Artur Safiullin, a columnist for Realnoe Vremya, economist with many years of banking experience, tells about 10 important events in the world markets that have shaken up entire industries and moved markets, not always in the direction of growth.
2010: Flash Crash and a number of other events of the year
This day on 10 May 2010 is still compared to “the rise of the machines” from the film 'Terminator'. Within five minutes, the Dow Jones index collapsed by 10% (998,5 points), S&P 500 broad-based stock index sank by 9%, and the market was gripped by panic.
One person and many robots are to blame. Navinder Singh Sarao, a trader with Asperger's syndrome who suffers from serious socialisation problems, conducted fraudulent transaction with E-mini S&P 500 futures contracts by placing and instantly withdrawing 19,000 offers for the purchase and sale of an instrument with a volume of up to $200 million using high-frequency trading programmes for a total amount of about $4,1 billion.
The so-called “spoofing”, or the imitation of transactions with the aim of misleading financial market participants and obtaining illegal profits, led to the failure of trading algorithms and a collapse of the stock market. It should be remembered that already by 2010, the share of robotic trading accounted for about 70% of the turnover of the stock market.
As early as June 2010, such operations were banned. The SEC regulator introduced exchange trading rules, according to which if a stock value deviates in any direction for more than 10% within 5 minutes, transactions are suspended.
Also this year, the world witnessed a debt crisis of sovereign obligations of a number of countries (Portugal, Ireland, Italy, Greece, Spain); a massive explosion with an oil spill on an oil platform owned by British Petroleum (BP) in the Gulf of Mexico; the public offering of Tesla's shares.
2011: Occupy Wall Street protest movement and other events of the year
The spontaneous protest movement Occupy Wall Street was first mentioned in the press in the autumn of 2011. Its emergence was due to the situation that developed as a result of the global financial crisis, when the governments of both the United States and European countries used billions of dollars of financial injections into affected banks and financial institutions as the main measure to combat the crisis.
This happened against the backdrop of growing inequality in society: for example, in 2011, experts from the Congressional Budget Office (CBO) distributed information, according to which one percent of Americans considered the richest citizens of the United States, between 1979 and 2007, more than doubled their share in the national income of the country.
Experts also drew attention to an uneven growth of incomes — among the middle class and the poorest Americans, they grew much slower than among the richest residents of the country. Besides, according to analysts, mass demonstrations in the Middle East and North African countries, which eventually led to the overthrow of the acting governments in Egypt, Tunisia and Libya, had a significant impact on the activation of the protest movement.
Also that year, the world saw the accident at the Fukushima nuclear power plant; the beginning of the so-called Arab Spring; the death of the founder and CEO of Apple, Steve Jobs.
2012: Mario Draghi's role in the Eurozone bailout and other events of the year
Faced with an avalanche of euro-zone sovereign debt crises, the president of the European Central Bank (ECB), Mario Draghi, said in a landmark speech in July 2012 that, within its mandate, the ECB would do everything possible to preserve the euro, and then added: “Believe me — it will be enough.”
By mid-summer 2012, doubts about the future viability of the European Monetary Union were at their height. One indicator of this was the fall of the euro to almost its lowest level in two years — USD 1,20. Plus, the stock indexes of the eurozone countries had been falling for several months.
The markets believed Draghi: the euro, stock prices, and government bond prices of troubled countries immediately went up, and the upward trend that began then continues, in fact, to this day. After all, the head of the powerful European Central Bank, declaring his unconditional determination to support the euro, deprived all the speculators who bet on the collapse of the euro and the collapse of the eurozone of their chances of winning.
Also that year, the world saw the public offering of Facebook shares and the LIBOR (London Interbank Offered Rate) scandal. The manipulation of the LIBOR rate was carried out by the largest European and American banks, which ended in an international scandal in 2008-2016 and the subsequent global reform of benchmark interest rates in the world. As a result of the scandal, which culminated in 2012, there was a change in the administration of LIBOR. Besides, as a result of the litigation, a large international group of banks paid fines. Former trader Tom Hayes was the only one who was convicted for a felony.
2013: Collapse of gold prices and a number of other events of the year
After 12 years of continuous growth in the price of this metal, the expected collapse occurred — the price fell by more than 25%, from $1,660 to $1,200 per ounce. The reason was the strengthening of global economy after the crisis and a decline in demand for precious metals as a result. It should be noted that the price of gold only in 2020 updated the maximum since 2012.
Also that year, the world saw the public offering of Twitter shares; the publication of the Edward Snowden reports.
2014: Alibaba public offering and other events of the year
The Chinese e-commerce giant's stock offering caused a stir and was the largest in history to that date — the company raised $25 billion through stock sale. On the bid opening day, the stock price soared from $68 to $94. In 2019 alone, the public offering of Saudi oil company Aramco broke Alibaba's record.
Also that year, the world saw a drop in oil prices due to an increase in oil production by hydraulic fracturing (fracking); the beginning of the conflict in Ukraine; the payment of a $17 billion fine by Bank of America for mortgage fraud.
2015: Collapse of Chinese stock market bubble and other events of the year
After a large and rapid rise in the shares of Chinese companies, there was an equally rapid and catastrophic collapse. The reason was simple — the companies' estimates were much more optimistic than their actual performance. China's stock market was dominated by private investors, who often invested loaned funds.
From November 2014 to June 2015, stock indexes on China's stock exchanges more than doubled — for example, the Shanghai Stock Exchange index rose from 2506,86 to 5045,69.
On July 8, the Shanghai Stock Exchange index fell by 6,4% and the CSI300 index — by 6,7%. The fall caused a panic, and more than 500 large companies suspended trading in securities the next day because of the risk of going bankrupt. The fall in China's stock exchanges also affected the global stock market: Japan's Nikkei 225 index fell by 3,1%, Australia's iron ore prices fell by almost 6%, South Korea's Kospi index fell by 1,2%, and oil prices fell from $60 to $57 per barrel.
The securities that have a turnover on the Chinese stock market suffered losses of more than $3 trillion in their value, the highest depreciation since 1992.
On July 18, the next collapse occurred — the Shanghai Composite index fell by 6,15%. Overall, the Shanghai stock market fell by 30 per cent in the three weeks from July 8. On August 17-20, after a temporary stabilisation, the stock market crash resumed. On August 24, the collapse of the Chinese stock market led to a drop in stock indexes by 6-8% worldwide.
Also that year, the world saw the start of the ECB's programme to buy back government bonds; the merger of Kraft and Heinz; Switzerland's refusal to link the franc to the euro.
2016: Donald Trump's election and a number of other events of the year
President Trump is a person from the category of people who are able to move the markets with their words and statements. In addition to the statements, Trump contributed to the reduction of market regulation, demanded a rate cut from the Fed, and started a trade war with China. Overall, markets did well during the Trump administration.
Also that year, the world saw Brexit — the withdrawal of Britain from the European Union; the publication of the so-called Panama Papers on offshore companies associated with the leaders of world powers; the purchase of Time Warner by AT&T.
2017: Bitcoin breaks value records and other events of the year
The rampant growth in the value of bitcoin made cryptocurrencies not just a way to pay for things and services on the darknet but a tool for investments. In 2017, bitcoin started at around $1,000 and was trading at a peak around $20,000.
Also that year, the world saw a sharp increase in US rates and Trump's tax reform.
2018: Disastrous 4th quarter of the year and other events of the year
Few people could have predicted the failure in the markets in the 4th quarter of 2018 — the Dow Jones index fell by 12%, S&P — by 14%, NASDAQ — by 17,5%. It was the worst quarterly failure since the 2008 financial crisis. The reason was a number of factors:
- oil prices fell by a third;
- problems at tech giants, for example, Apple's quotes fell by 30% since the summer due to poor smartphone sales;
- rising key central bank rates and economic slowdowns;
- the Brexit effect and escalation in the China-US trade war;
- the shares were “outbid”, that is, not conditioned by the financial condition of the issuers.
Also that year, the world saw the collapse of cryptocurrencies and the elimination of NAFTA (the North American trading zone).
2019: Fall in quotations of legal marijuana sector and other events of the year
The optimistic plans of the companies participating in the market, emerged in 2013-2014, faced an objective reality in the form of strict legislation and regulation of this sector. The growth of quotations was replaced by a long-term decline, reaching 40-80% for some issuers.
In a research note to clients, Stifel (investment bank) experts analyzed this sector and outlined the problems — the decline was the result of the rapid development of the industry, which faced legal restrictions. The simple financing of this industry turned into a complex financial environment. A clear path to regulatory easing became more confusing. At the same time, the vaping crisis also hindered the progress of the entire market.
It is believed that the shares of companies in this sector became popular as an element of the triune effect of mini-bubbles of the past decade: blockchain, legal marijuana, vegetable meat.