WHAT TO WATCH IN 2022

Covid

Delta. Omicron. Alpha. It’s hard to know what’s happening with Covid mutations right now, let alone what might be on the way next.

When news of omicron first broke, the volatility index surged to a one-year high. But since studies began to show that vaccines offer some resistance, the markets seemed to calm.

Could we be looking at another year of border closures and rolling lockdowns? The only real certainty, I guess, is that this sort of uncertainty will continue.

Rising interest rates

Bye, bye generous stimulus government packages. Hello, rising interest rates. For the first time in over a decade, we are looking at an era of interest rates rising and bond buying slowing to a stop.

This means that stocks carrying a lot of debt could be in a bit of trouble, along with companies that have large debt-to-earnings levels or higher price-to-earnings ratios. Real estate stocks will also face pressure, as higher rates tend to slow spending and so affect property price growth.

On the flipside, who benefits? Stocks that are bond issuers (for example, insurance companies) may well end up ahead, while banks and lenders by and large tend to make more money whenever rates are rising. As well, they will make higher margins (as they make money from the difference in what they pay out in savings versus what they make from lending to mortgage holders).

New energy crisis

Quite a few investors have become amateur meteorologists in recent months. This is because, with a strengthening La Nina and a weakening polar vortex, there’s every chance that this year’s northern winter may be on its way to being freakishly cold.

If this grim forecast comes to pass, there is something like a 70% chance that the world will face an energy crisis. That will bring more inflation in its wake, causing oil, gas, energy and petrol prices to skyrocket when those prices are already high.