It has been a bleak year for many investors. Global investors have lost $23tn of wealth in housing and financial assets so far in 2022, according to my estimates. That is equivalent to 22 per cent of global gross domestic product and uncomfortably exceeds the lesser $18tn of losses suffered in the 2008 financial crisis.

Hopefully though, next year will not be so bad for assets, because the cycle of global liquidity is bottoming out. Part of my reasoning is that quantitative easing programmes by central banks to support markets are impossible to reverse quickly because the financial sector has become so dependent on easy liquidity. The very act of quantitative tightening creates systemic risks that demand more QE. 

We track the fast-moving, global pool of liquidity — the volume of cash and credit shifting around financial markets. The impact of the ebb and flow of this pool, currently about $170bn, can be seen in the central bank programmes to support markets through the Covid-19 pandemic — quantitative easing. The latter drove another “everything up” bubble through 2020-21. But as soon as policymakers hit the brakes in early 2022 and triggered a near-$10tn liquidity drop, asset markets collapsed.