2022 has been quite a handful for investors. The year has been marked by a vicious bear market, record-high inflation, hawkish central banks around the world, Russia’s invasion of Ukraine, the collapse of crypto, a near monetary policy crisis in the U.K., and Elon Musk’s Twitter takeover, just to name a few.
As is our annual tradition, we gathered the financial terms that generated the most above-average interest on Investopedia throughout the year, reflecting both market events and headlines. With more than 13 million monthly readers and over 25 thousand articles on our site, we have a front-row seat to the topics and terms that drove the most interest in 2022.?
1. Poison Pill
We can thank Elon Musk for 2022’s top term of the year. Poison pill is a colloquial term for a defense strategy used by the directors of a public company to prevent activist investors, competitors, or other would-be acquirers from taking control of the company by buying up large amounts of its stock. On April 14, 2022, Musk made an unsolicited offer to purchase Twitter at $54.20 per share. Twitter's board initially responded with a "poison pill" strategy to resist a hostile takeover. Ultimately, the board relented, and Musk captured the blue bird.
This word has been on everyone’s lips in 2022 because sticky high inflation and rising interest rates are usually a recipe for a recession. A recession is defined as a significant, widespread, and prolonged downturn in economic activity. On April 5, 2022, Deutsche Bank became the first major bank to forecast the US economy would go into a recession, and the herd joined in shortly thereafter. Given current economic forecasts, expect this term to remain popular in 2023.
3. Hostile Takeover
Another term that popped thanks to Musk and Twitter. Musk’s unsolicited bid to buy Twitter on April 14, 2022, was considered a hostile takeover, which refers to the acquisition of one company by another corporation against the wishes of the former. Ultimately, Musk prevailed, despite the risk of the aforementioned poison pill by Twitter’s former board.
4. Bear Market
Even though 2022 was the year of the tiger, bears stole the show. Bear markets roamed freely, gorging on risk assets like stocks, crypto, and even bonds. Many saw this coming after a 100% rise in the S&P 500 from 2018 to 2021, but the 20% or more declines across capital markets—the hallmark of a bear market—hurt just the same. The Dow Jones Industrial Average managed to claw its way back out as of the beginning of December, but the Nasdaq and the S&P 500 are still down.
5. Cold Storage
Cold storage and cold wallets became very popular this year as cryptocurrency investors reacted to news of record-breaking digital asset hacks online. For example, the Binance exchange was hacked in October 2022 for $570 million. Then, on November 11, 2022, the cryptocurrency exchange FTX filed for bankruptcy after freezing customers assets. That same day, more than $600 million was stolen from investors with assets stored in FTX wallets and within the exchange. Cold wallets are digital wallets not connected to the internet and therefore less vulnerable to the hacks and downfalls of online systems.
6. Federal Funds Rate
The term federal funds rate refers to the target interest rate set by the Federal Open Market Committee (FOMC), and it’s the rate at which commercial banks borrow and lend their excess reserves to each other overnight. On June 15, 2022, the FOMC announced the federal funds rate would be going up by 75 basis points, the biggest hike since 1994. It raised the federal funds rate another 75 basis points three more times in 2022, and doesn’t appear to be finished. This rate-rising environment is new to many younger investors, who are now witnessing how the Fed sets monetary policy and how that impacts their own wallet.
Think of capitulation as throwing in the towel. Capitulation in investing describes when a significant number of investors succumb to fear and sell over a short period of time, causing the price of a security or a market to drop sharply amid high trading volume. Early in the day on January 24, 2022, major U.S. stock indices started out with significant declines which prompted more widespread worry of a larger market crash. While the S&P 500 fell as much as 25% from its highs this year at its low point, most investors never really capitulated as they did in past bear markets given the reports from several online brokers.
Government bonds in the U.K., India, and several other commonwealth countries are known as gilts, which are the equivalent of U.S. Treasury securities in their respective countries. On September 22nd, British government bond prices, or gilts, had their largest drop since the start of the COVID-19 crisis in March of 2020 as then Prime Minister Liz Truss attempted to push forward an economic agenda of tax breaks amid rampant inflation. She was forced to pull back her plan and fire her finance minister, and the blunder eventually cost her the job.
Petrodollars are crude oil export revenues denominated in US dollars. On February 24, 2022, Russia invaded Ukraine which contributed to pushing crude oil prices higher than $125 per barrel in the Spring. Then on March 14th, the EIA reported the average U.S. price of regular grade gasoline increased to a record $4.43 per gallon.
10. Core Inflation
Inflation was top of mind and one of our most popular terms all year, especially as the annual rate of inflation hit a 40-year high. Core inflation is the change in the costs of goods and services, excluding food and energy sectors. Food and energy prices are exempt from this calculation because their prices can be too volatile or fluctuate wildly, as we saw in 2022. On June 13, 2022, the Bureau of Labor Statistics released the May 2022 Consumer Price Index (CPI) data which showed that U.S. core inflation continued to persist at levels above a 6% year-over-year change, despite recent interest rate hikes by the Federal Reserve. As of publication, core inflation is still above 6%.
There are always many terms that have their moment in the spotlight, or are of generally high interest throughout the year that do not make our top ten. Here are the six honorable mentions for 2022:
- Inflation: While the extreme rise in prices that dominated headlines this year made inflation one of the most searched terms on Investopedia, it did not top its cousin, core inflation, which strips out food and gas prices.
- Money Laundering: The collapse of crypto broker FTX into bankruptcy likely drove interest in this felonious term, especially when we learned about the broker’s odd relationship with Alameda Research, a hedge fund that it also owned.
- Environmental, Social and Governance (ESG) criteria: ESG criteria is always popular on our site, but it likely was in 2022 for the wrong reasons. Accusations and investigations into greenwashing on the part of some asset managers has many investors questioning the legitimacy of ESG investing.
- The Wash-Sale Rule: This legal term always pops up in bear markets, and 2022 was no exception. Investors may be tempted to sell losing stocks before year-end, take the tax deduction, and buy those stocks back at cheaper prices within thirty days, but that’s a No No, according to the IRS’s Wash Sale Rule.
- Dollar-Cost Averaging (DCA): One of the golden rules of successful long-term investing was very popular this year, which is always good to see. With the bear market slashing stock prices across several highly valued sectors, 2022 was a good year for investors to keep buying and lowering the average share price of favorite stocks.
- Treasury Inflation-Protected Securities (TIPS): TIPS had several months in the limelight in 2022 as investors looked for any security that could offer the slightest protection against inflation. TIPS served that purpose for a few months in 2022 until better yields arrived across the bond market.