Money4 January 2022•3 minute read
Investment insights for the new year
We’ve gathered a few key insights regarding the major risks surrounding continued market volatility for 2022 and beyond, along with a few positive perspectives on what to expect in 2022.
- Central banks tightening monetary policy at a faster pace than expected. After many years of extremely accommodative policy with interest rates near zero, investors will have to start to factor in rising interest rates. The tapering of large amount of stimulus provided by the central banks via quantitative easing programs could also cause some volatility particularly in bond markets.
- Inflation, which is a key macro variable worth watching closely. Inflation has recently risen to levels not seen for decades. Whilst initially the consensus was that the spike was only temporary (caused by supply chain disruptions caused by the pandemic), most economists are actually expecting the effects to last longer. Any further spikes to inflation, or even if it were to remain at these elevated levels, could mean that the central banks would have to accelerate their pace of tightening monetary policy.
- Rising interest rates, which are likely to have a negative impact on one of the most loved asset classes by Australian investors: residential property. It’s unlikely we’ll see house prices experiencing similar growth in 2022, compared to what we’ve seen over the past two years.
- The ongoing impact of COVID-19 and potential new variants of the virus, similar to what has happened over the past few weeks with Omicron. New variants could mean health systems under pressure, further lockdowns and related impact on the economy and markets.