AFTER a rough and volatile year in 2021, we have finally arrived at the January month of 2022.
With the crunching effect of Covid-19 turning into Omicron now, the world is still wondering how many more folds of mutation will surface before the human reaches the end of this dark tunnel.
In 2022, we foresee there could be more volatility in market and the global economics will face more shortage in liquidity after the pandemic stimuli end in April for both US and Europe.
Literally, here are few things we need to look out for this year in order to protect your investment monies safely:
1. Tapering exercise – The US Federal Reserve policymakers have made known openly many times in 4Q21 on their intention to shave the balance sheet of US$8.3 trillion from Government’s budget deficit.
This will be done in 2022 but yet to mention the dates. In our opinion, there will be most probably two rate hikes this year in order to trigger a tapering program.
Though some traders expect three rate hikes, we think one in the first semester and the other in second semester will be “disastrous” enough to rock the global markets!
Hence, pay attention to the rate tightening most likely in April/May and Oct /November seasons. These actions will follow the corporate earnings of huge companies in US and European markets.
2. Weakening dollar – While the US government is planning to repatriate the fund to US soil through the tapering exercises, we all know that the US is facing a challenge of fund shortage in paying Government bills.
On one hand, they want to increase rates to control inflation and money back to the US banks, the other side will continue to print US dollar for supporting sovereign policies like infrastructure building, financial bonus to Covid families, tax incentives etc.
When US dollar tanks, lookout for gold prices to surge and this will influence silver and commercial metals. Construction companies will need to adjust their risk margins for undertaking new projects.
Farmgate prices for food will follow suit and cause stagflation when salaries cannot keep the pace of rapid rising prices.
3. OPEC+ countries have been discussing to increase global supplies by 400,000 barrels on daily basis from February onwards.
Even this plan might commence, it will have little downside effect on crude oil due to shrinking shipment on global basis and shortage of energies from post effect of pandemic crisis.
In line with weaker US dollar and the flamboyant nature of OPEC leaders, they may reverse the policy in mid-year and continue to push crude oil prices to above US$90 per barrel.
In summary, this year will subject to some major market factors stated above and that could trigger a series of risk factors if Omicron mutates into another new wave.
As long as the global travelling is still on limitation, every country in the world will be facing shrinking in economic growth and reducing GDP.
Stay alert to watch the market. There could be some inverse opportunities for you soon!
Dar Wong is a professional in financial industry since 1989. The expressions are solely his own. He can be reached at [email protected].