Market Structure Compendium

Recapping 2022 Market Metrics & Looking to 2023 with Our Market Structure Survey

Executive Summary

The post-COVID years produced golden years for capital markets. The long-running 0% interest rate environment allowed all assets to increase in value, even risk assets of all types. In equities, IPOs exploded – issuance was up +75% from 2020 versus 2019 and then another +80% from 2021 versus 2020. IPOs totaled $85.4 billion in 2020 and $153.6 billion in 2021, +86% and +234% to the three-year pre-COVID average of $46.0 billion. This boom in issuance occurred even if some of these companies should not have IPOd at the values they did. This was evidenced by some stock prices declining around 60% after the first earnings call for these newly public companies.

What a difference a year makes. Last year we saw a complete reversal, with some capital markets businesses down around 90%. Issuance essentially shut down. IPOs closed out the year at $8.5 billion in deal value, versus $153.6 billion the prior year, -94.4%. SPACs have all but disappeared at $13.1 billion versus $162.4 the prior year, -91.9%.

Markets began transitioning. The move away from 0% interest rates was well underway, as the Fed continued to raise the Fed Funds rate. The Fed raised this rate seven times last year for a total of 425 bps, an unprecedented rate of increases. This was followed by another 25 bps hike at the January meeting, bringing the range to 4.50%-4.75%. This in turn caused a revaluation of financial assets, and, with the end game uncertain, market participants were asking what should be the intrinsic value of many assets. As such, on average, markets were on a downward trend throughout last year. The average price for the S&P 500 index in 2022 was 4,098.51, -4.1% to the prior year’s average. From the start of the year to the end, or from January 3 to December 30, the S&P 500 dropped 20.0%.

So what does 2023 hold for capital markets? Many economists and market participants expect the U.S. to enter a recession this year – a mild one – and the debate continues as to whether or not this is appropriately baked into markets. The 10-year Treasury peaked at 4.2340 in October of last year. By the second week of November, it came down below 4.0000, averaging 3.6776 from that point to the end of the year. (The 10-year has averaged 3.5366 YTD at the writing of this report.) Market participants expect the Fed to continue hiking rates, and it appears a 5.00 rate is baked into markets.

Report Highlights

Market Metrics (2022 average, Y/Y change)

  • Volatility & Volumes: VIX 25.63, +30.4%; equity ADV 11.9B shares, +4.1%; listed options ADV 40.5M contracts, +4.8%
  • Markets: S&P 500 4,098.51, -4.1%; DJIA 32,897.35, -3.4%; Nasdaq 12,231.35, -14.9%; Russell 2000 1,884.50, -16.0%
  • Capital Formation: total $99.4 billion, -77.2% ; secondaries $78.5 billion, -65.0%; preferreds $12.4 billion, -78.7%;IPOs $8.5 billion, -94.4%; SPACs $13.1 billion, -91.9%;

Market Structure Survey

  • Volatility & Volumes estimates: VIX 20-25 range, 53.7% of responses; Equity ADV ~10-15 billion shares range, 63.4% of responses; listed options ADV 30-40 million contracts range, 51.2% of responses
  • Markets estimates: Decline somewhat further at 51.2% of responses; upside risks inflation, monetary policy, geopolitical events; downside risks inflation, monetary policy, geopolitical events
  • Retail Investor participation estimates: equities expectations to decrease somewhat, 50.0% of respondents; options expectations to remain about the same, 35.9% of respondents




Katie Kolchin, CFA
Director of Research