Even though there were steps made toward economic recovery in the last year, a few factors are making that challenge even tougher in 2022. With rising inflation, an increase in interest rates, and disruption to international supply chains, the new year is set to be a tough one for global markets.
This does not constitute advice and advice should be sought in all instances before acting on it.
Despite making strides with vaccination and treatment efforts, COVID-19 continues to threaten recovery, with the Omicron variant being the latest test. While many businesses have successfully adapted to ever-changing restrictions and rules, a return to lockdown restrictions would cripple many others.
However, if the spread of the virus is as contained as possible, central banks are expected to increase interest rates or dial back the stimulus programmes they’ve supported in order to ease the impact of inflation.
International affairs
A potential crisis could be imminent if the US Federal reserve does indeed raise borrowing costs in the new year – something they’ve said they anticipate doing thrice over the year (as has the Bank of England).
By the end of 2022, the economic climate could be drastically different to the end of 2021. It’s a difficult decision as it’s between a rock and a hard place – either increased inflation or overvalued markets. International financial experts expect tighter global financial conditions in the wake of the changing economic conditions and therefore, investors should be prepared for volatile markets in the year to come.
Energy
The energy crisis this winter stems from surging energy prices in Europe and Asia and the struggle to meet demand, and there seems to be no end in sight to elevated inflation. It’s important to not underestimate how much of an influence power prices will have across the globe and the problems it could lead to for an already disrupted supply chain.
What else should you look out for?
Emerging markets are the space to watch, since many governments are still trying to gain control of the spread of COVID, but some success will mean that much needed activity will surge. Additionally, policy changes in the US and China, as well as geopolitical turmoil will undoubtedly impact the global economy.
Get in touch
To ensure your financial portfolio is protected against any challenges this year will bring, get in touch with your financial adviser for a full review. Get in touch today.
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