The Big Issues For 2022
With the calendar year drawing to a close, the parlor game of pretending to know what will happen in the next 12 months has begun. Yet when it comes to 2022 (and beyond), I am not sure whether it is worth even pretending. I cannot recall a previous time when there were so many big question marks looming over so many key economic issues.
This deep uncertainty is especially intriguing with respect to financial markets. Should any of several developments to watch take a negative turn, the implications for today’s elevated markets could be dire.
Among the most urgent and topical issues, other than COVID-19, is inflation. Are this year’s price increases transient, or do they represent something more ominous? My useless answer is, “I don’t know.” Although I did suggest at this time last year that inflation would become a bigger issue than weak GDP growth, now, as I look ahead to 2022, I am far less sure.
Much of today’s inflationary pressures could still relate to the speed of the recovery in many economies, and, of course, to large, still-persisting supply disruptions. But the supply shortages themselves may be symptoms of bigger problems, such as economic over-stimulation, ineffective monetary policies, or weak productivity growth. The implications for financial markets would be quite different depending on which of these factors are at work, and to what extent.
