R.I.P. Cheap Money (2008-22)

Cheap money-an incredibly popular and influential feature of finance that led to a surge of wealth, speculative trading and booms in ridiculous investments such as meme stocks and digital images of cartoon monkeys died suddenly in 2022. It was 14 years old. Cheap money is survived by its estranged relative, expensive money.

- PAULA DWYER

The death has been attributed to a surge in consumer inflation that forced central banks around the world to aggressively lift interest rates to the highest levels in a decade and a half. The end of cheap money has been mourned throughout the financial world, most loudly in the US stock market, which saw its worst decline since 2008 amid the disappearance of what had come to be known as the "Fed put": the belief that the Federal Reserve would always come to the rescue with a more market-friendly policy if stocks tumbled.

Cheap money's demise caused similar grief in the bond market, where total returns were the most negative on record. Even the Treasury's inflation-protected securities, the bonds known as TIPS that are meant to shield retail investors from the damage that inflation does to savings, lost almost 12% in 2022. The despair reached deep into the cryptocurrency market, which lost 70% of its value in 2022. The schadenfreude derived from that anguish was arguably the only bright side for many of the adults in traditional finance.

Now that the calendar has flipped to 2023, it’s clear the grief will continue while financial professionals and amateurs alike confront a new investing regime, the likes of which few have experienced. Even now that most of the world’s central banks are nearly done raising interest rates, the newfound influence of expensive money has only just begun to shake the foundations of the financial world.

For market participants whose careers hold more tomorrows than yesterdays, 2023 will be the first full year of navigating a climate that’s not dominated by the halcyon glow of cheap money and plentiful liquidity.