As the global economy recovers from Covid-19, the Russia-Ukraine conflict is banking’s ‘big black swan’ in 2022
- Pandemic restrictions are easing in most countries, but investors looking forward to a global economic recovery are now having to prepare for a bumpy ride ahead
- Central banks are tightening monetary policy, along with financial conditions that could lead to a downturn in the economy
As the world continues to relax pandemic measures and central banks raise their rates and tighten policies, investors would do well to consider two key features of the market – inflation rates and economic performance.
With Covid-19 starting to ease in 2021, the global economy has been able to recover to varying degrees.
“In 2022, thanks to large-scale economic stimulus measures, the progress of global economic recovery is satisfactory,” said Kirk Wong, global market and forex strategist of Everbright Securities International.
Many central banks have started to raise interest rates or tighten their monetary policies, and this activity has begun to determine the market trend. “We have turned to investing in assets that tend to have better performance when interest rates rise. The consequence of interest rate increases is tightened capital liquidity, while the subsequent effect is higher market volatility, so our investment strategy also suggests diversifying the risk of interest rates,” said Wong.
“The strategy should be applicable for the next 12 months until the speed of rate increases starts to slow down.”
