China's Yuan Devaluation: The Aftermath [Chart] - Visual Capitalist
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China’s Yuan Devaluation: The Aftermath [Chart]

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China's Yuan Devaluation: The Aftermath [Chart]

China’s Yuan Devaluation: The Aftermath [Chart]

Oil and copper get decimated; Euro an unlikely winner

The Chart of the Week is a weekly Visual Capitalist feature on Fridays.

Sometimes it feels like the market is one giant ant farm. Investors and traders build all of their little tunnels, and then all of a sudden someone shakes the ant farm causing impending chaos for the hapless ant denizens.

In this case, it was the People’s Bank of China (PBOC) that shook the ant farm – and they did it multiple times this week.

It all started early Tuesday morning as China moved the midpoint of the yuan’s peg by 1.9%, the biggest move since 1994. The PBOC called this change a “one-time adjustment” and said its fixing will now become more aligned with supply and demand. They then proceeded to devalue the yuan two other times throughout the week for a combined 4.4% decrease in value. The Chinese central bank now claims that the yuan will move more according to market forces, which is necessary to get included into the International Monetary Fund’s basket of currency known as Special Drawing Rights (SDR).

We most recently warned about the inevitability of such central bank moves about a month ago, when the Bank of Canada decreased its benchmark rate for the second time in six months. However, it wasn’t until these moves by the PBOC that the market really felt uneasy, and the term “currency war” entered back into the public vernacular.

Investors are clearly shaken up, as all sorts of trading went haywire in the aftermath of the yuan devaluation. Some currencies, like the Canadian dollar, tanked early and then bounced back to take some gains against the USD. The euro fell initially and then bounced back in a big way, gaining 1.8% in the week’s trading. It’s now trading at eight-week highs.

Countries that are inextricably linked to China by regional trade, such as Singapore, Australia, and New Zealand, all had their currencies fall as well. Some emerging markets were also affected strongly, with the Indian rupee dropping -2.3% through the course of the week against the USD.

However, the biggest impact was to commodity prices. A lower yuan means imports are more costly and creates incentive to buy from domestic Chinese producers of base metals and energy. The devaluation was also interpreted by traders as an admission by the Chinese government that the economy is weak, and this helped copper and oil (WTI) tumble. Copper is at its lowest price ($2.35/lb) since the tail-end of the Financial Crisis, and WTI oil continued its worst summer in trading history to end up in a similar position at $42.35/bbl.

Gold is up on the week by about 1%, but it is also bouncing off of its lowest price since 2010.

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The Top Google Searches Related to Investing in 2022

What was on investors’ minds in 2022? Discover the top Google searches and how the dominant trends played out in portfolios.

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Trend lines showing when the top Google searches related to investing reached peak popularity over the course of 2022.
The following content is sponsored by New York Life Investments

The Top Google Searches Related to Investing in 2022

It was a turbulent year for the markets in 2022, with geopolitical conflict, rising prices, and the labor market playing key roles. Which stories captured investors’ attention the most? 

This infographic from New York Life Investments outlines the top Google searches related to investing in 2022, and offers a closer look at some of the trends.

Top Google Searches: Year in Review

We picked some of the top economic and investing stories that saw peak search interest in the U.S. each month, according to Google Trends.

Month of Peak InterestSearch Term
JanuaryGreat Resignation
FebruaryRussian Stock Market
MarchOil Price
April Housing Bubble
MayValue Investing
JuneBitcoin
JulyRecession
AugustInflation
SeptemberUS Dollar
OctoberOPEC
NovemberLayoffs
DecemberInterest Rate Forecast

Data based on exact searches in the U.S. from December 26, 2021 to December 18, 2022.

Let’s look at each quarter in more detail, to see how these top Google searches were related to activity in the economy and investors’ portfolios.

Q1 2022

The start of the year was marked by U.S. workers quitting their jobs in record numbers, and the effects of the Russia-Ukraine war. For instance, the price of crude oil skyrocketed after the war caused supply uncertainties. Early March’s peak of $125 per barrel was a 13-year high.

DateClosing Price of WTI Crude Oil
(USD/Barrel)
January 2, 2022$76
March 3, 2022$125
December 29, 2022$80

While crude oil lost nearly all its gains by year-end, the energy sector in general performed well. In fact, the S&P 500 Energy Index gained 57% over the year compared to the S&P 500’s 19% loss.

Q2 2022

The second quarter of 2022 saw abnormal house price growth, renewed interest in value investing, and a bitcoin crash. In particular, value investing performed much better than growth investing over the course of the year.

IndexPrice Return in 2022
S&P 500 Value Index-7.4%
S&P 500 Growth Index-30.1%

Value stocks have typically outperformed during periods of rising rates, and 2022 was no exception.

Q3 2022

The third quarter was defined by worries about a recession and inflation, along with interest in the rising U.S. dollar. In fact, the U.S. dollar gained against nearly every major currency.

Currency USD Appreciation Against Currency
(Dec 31 2020-Sep 30 2022)
Japanese Yen40.1%
Chinese Yuan9.2%
Euro25.1%
Canadian Dollar7.2%
British Pound22.0%
Australian Dollar18.1%

Higher interest rates made the U.S. dollar more attractive to investors, since it meant they would get a higher return on their fixed income investments.

Q4 2022

The end of the year was dominated by OPEC cutting oil production, high layoffs in the tech sector, and curiosity about the future of interest rates. The Federal Reserve’s December 2022 economic projections offer clues about the trajectory of the policy rate.

 202320242025Longer Run
Minimum Projection4.9%3.1%2.4%2.3%
Median Projection5.1%4.1%3.1%2.5%
Maximum Projection5.6%5.6%5.6%3.3%

The Federal Reserve expects interest rates to peak in 2023, with rates to remain elevated above pre-pandemic levels for the foreseeable future.

The Top Google Searches to Come

After a year of volatility across asset classes, economic uncertainty remains. Which themes will become investors’ top Google searches in 2023?

Find out how New York Life Investments can help you make sense of market trends.

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