Financial Instruments & Investments

A short-lived recovery in 2021 has been halted by the economic developments of 2022. Global output contracted as risks emerged from China and Russia and stock markets began to fall. The Dow Jones, for example, is experiencing a slow decline in index value following its recent high in December of 2021. Several shocks have hit the already weak economy following the coronavirus (Covid-19) pandemic: high inflation levels continue among world economies, leading to more fragile economic conditions. Major world currencies fell to a new low. The U.S. dollar, for example, has reached its lowest exchange rate with the Euro since 2002. The future outlook is tilted downwards as the war in Ukraine has led to an energy and commodity crisis. Inflation rates may continue to increase as they have been doing throughout 2022. Inflation in the U.K. has risen roughly four percent from January to July. Like many countries, this is not expected to ease without great efforts from local governments.

The Dow Jones index-value low in 2022
30,775
The lowest Euro to U.S. dollar exchange rate experienced since 2002
0.96
The inflation rate in the U.K has risen steadily the duration of 2022
9.1%

Market size

The United States is home to the two largest stock exchanges

Largest stock exchange operators worldwide as of October 2022, by market capitalization of listed companies (in trillion U.S. dollars)

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Further details: Visit original statistic Largest stock exchange operators worldwide as of October 2022, by market capitalization of listed companies (in trillion U.S. dollars)

By far the two largest stock exchanges in the world are the NYSE and the NASDAQ – both located in New York. City. Taken together, the value of the shares listed on these two exchanges had a combined market capitalization of over 36 trillion U.S. dollars – more than the next eight-largest stock market operators combined. The next three largest stock exchanges are located in East Asia, followed by the two major European stock exchange operators (Euronext and the LSE Group).

Stock exchanges
Stock market indices
Securities in China

Market segments

Equities have out-performed bonds over the last 20 years

Annualized real return on equities, bonds and bills worldwide excluded the United States from 2002 to 2021

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Further details: Visit original statistic Annualized real return on equities, bonds and bills worldwide excluded the United States from 2002 to 2021

The two most prominent financial instruments are equities and bonds. Equities (or shares) are the ownership of a portion of a company, which can then be traded. The value of this portion may fluctuate depending on the company’s performance and market conditions, making equities a potentially risky investment. Bonds differ in being a low-risk, fixed price investment where a company or government receives an amount of money to be repaid after a certain period, along with regular interest payments.

Exchange traded funds
Mutual funds
Investment funds

Industry trends

ESG investments set to rise

Share of professional investors increasing their environmental, social, and governance (ESG) investments worldwide from 2020 to 2022

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Further details: Visit original statistic Share of professional investors increasing their environmental, social, and governance (ESG) investments worldwide from 2020 to 2022

Environment, Social and Corporate Governance (ESG) reflects the environmental and social impact of an investment. Two main factors are driving the growth of ESG investments. First, is concern over the climate crisis, with many investors worrying that consumer sentiment will turn against companies who are not environmentally responsible. Second, is changing attitudes toward many social issues, such as worker conditions, community investment and support for diversity and inclusion.

Ethical investments in Europe
European green bonds
ESG investments in France

Industry leaders

U.S. stock exchanges host the largest trading volumes

Largest stock exchanges worldwide as of June 2022, by value of electronic order book share trading (in billion U.S. dollars)

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Further details: Visit original statistic Largest stock exchanges worldwide as of June 2022, by value of electronic order book share trading (in billion U.S. dollars)

While the two largest stock markets in the U.S. – the NASDAQ and the NYSE – have far larger market capitalizations than any other stock exchange, looking at trading volumes narrows the gap significantly. While still the two largest stock exchanges with 3.1 and 2.2 billion U.S. dollars of stock traded in 2022 respectively, the third-placed Shenzhen Stock exchange is not far behind at 1.8 U.S. dollars. Based on trading volumes, U.S. markets top the list, followed by East Asia, then Europe.

Dow Jones Industrial Average
London Stock Exchange
Euronext Stock Exchange

Unique aspect of the industry

Bond markets react to interest rates

Yield on ten-year government bonds of selected countries worldwide as of May 2022

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Further details: Visit original statistic Yield on ten-year government bonds of selected countries worldwide as of May 2022

In addition to stocks, investors often choose to trade bonds on financial markets. Bonds offer a low risk, stable return, with the issuer paying periodical interest then the original amount upon ‘maturity’. For this reason, bonds are often traded before maturing effectively allowing investors to lock in a secure interest rate. If investors expect interest rates to fall, it makes sense to purchase existing bonds, but if rates rise, then investors lose out as new bonds issued have a higher return.

International bond market
German long-term government bond yields
Japanese long-term government bond yields

State of the industry

  • Mutual funds
  • Private equity worldwide
  • Exchange traded funds
  • Socially responsible ethical investments (SRI) in Europe
  • Private equity in Germany, Austria and Switzerland
  • Green bonds in Europe
  • Green finance and responsible investments in France
  • The Dow Jones indices
  • Bitcoin (BTC)
  • Securities market in the United Kingdom (UK)
  • Securities market in China

Industry Definition

The primary goal of investing in financial instruments and is the efficient allocation of monetary resources within a capitalist economy. Such investment on an open market allow people with excess financial resources to give these funds to businesses or individuals who need them, with the promise of some kind of return for their investment. A variety of different financial instruments are used to achieve this, such as shares, bonds, currencies and derivatives (which effectively bet on the future price of a commodity or financial asset).

More interesting topics from the industry "Financial Instruments & Investments"

More interesting topics from the industry "Financial Instruments & Investments"

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