To The Moon

Hello Tigers,

Captial_Insights is an account which is aim to provide insights and opinions from institutional investors. We are hoping to provide you with a wider vision and understanding of markets & investing. In a long run, we aim to accompany you to make long-term investment decisions and obtain satisfying returns.

It is time to say goodbye to 2021! What will happen next year? No one knows.

Bloomberg forecasts the biggest risks to the global economy in 2022. There are 7 main risks may impact the stock market...

We invite you to join the VOTE, and tell other Tigers how is your concerns about the risks. We wish you a lucrative year. 

We will share you the TOP 10 lists of BEST Stocks In 2022. 

1. Omicron and More Lockdowns

It’s early for a definite verdict on the omicron variant of Covid-19. Apparently more contagious than its predecessors, it may prove less deadly too. That would help the world get back to something like pre-pandemic normal -- which means spending more money on services. Lockdowns and Covid caution have kept people out of gyms or restaurants, for example, and encouraged them to buy more stuff instead. A rebalancing of spending could boost global growth to 5.1% from the Bloomberg Economics base forecast of 4.7%.

But we may not get that lucky. A more contagious and deadly variant would drag on economies. Even a three-month return to the toughest 2021 restrictions — countries like the U.K. have already moved in that direction — could see 2022 growth slow to 4.2%. In that scenario, demand would be weaker and the world’s supply problems would likely persist, with workers kept out of labor markets and further logistics snarl-ups.

2.The Threat of Inflation

At the start of 2021, the U.S. was forecast to end the year with 2% inflation. Instead it’s close to 7%. In 2022, once again, the consensus expects inflation to end the year close to target levels. Another major miss is possible. 

Omicron is just one potential cause. Wages, already rising at a rapid clip in the U.S., could climb higher. Tensions between Russia and Ukraine could send gas prices surging. With climate change bringing more disruptive weather events, food prices may continue to rise.

Not all the risks are in the same direction. A new wave of the virus could hit travel for example — dragging down oil prices. Even so, the combined impact could still be a stagflationary shock that leaves the Fed and other central banks with no easy answers.

3.Powell-ing Toward Fed Rate Hikes

Recent history, from the taper tantrum of 2013 to 2018’s stocks selloff, shows how a tightening Fed spells trouble for markets.

Adding to risks this time around are already-elevated asset prices. The S&P 500 Index is near bubble territory, and home prices accelerating away from rents suggest housing-market risks are bigger than at any time since the sub-prime crisis back in 2007.

Bloomberg Economics modeled what happens if the Fed delivered three hikes in 2022 and signaled it would keep going until rates reach 2.5%, pushing Treasury yields up and credit spreads wider. The result: a recession at the start of 2023.

4.Fed Liftoff and Emerging Markets

Fed liftoff could mean a crash landing for emerging markets. Higher U.S. rates typically boost the dollar and trigger capital outflows — and sometimes currency crises — in developing economies.

Some are more vulnerable than others. In 2013 and 2018 it was Argentina, South Africa and Turkey that suffered most. Add on Brazil and Egypt — call them the BEASTs — to get the list of five at-risk economies in 2022, based on a range of measures compiled by Bloomberg Economics.

5.Risk Rankings

High funding needs and weak governance add risks for some emerging markets

6.Political Turmoil in Europe

Solidarity among leaders who back the European project, and European Central Bank activism to keep government borrowing costs under control, helped Europe weather the Covid crisis. In the year ahead, both could fade.

A fight over the Italian presidency in January could upend the fragile coalition in Rome. France heads to the polls in April with President Emmanuel Macron facing challenges from the right. If euro-skeptics gain power in the bloc’s key economies, it could shatter the calm on European bond markets and deprive the ECB of the political support required to respond.

Emmanuel Macron Photographer: Alessia Pierdomenico/Bloomberg

Say that sovereign spreads widen by 300 basis points, like they did in last decade’s debt crisis. Bloomberg Economics model shows that could chop more than 4 percent from economic output by the end of 2022, sending the euro area into recession and reviving concerns about its viability.

7.The Future of Fiscal Policy

Governments spent heavily to support workers and businesses in the pandemic. Many now want to tighten their belts. The pull-back of public spending in 2022 will amount to some 2.5% of global GDP, about five times bigger than austerity measures that slowed recoveries after the 2008 crisis, according to UBS estimates.

In the U.S., fiscal policy swung from boosting the economy to slowing it in the second quarter of 2021, according to the Brookings Institution. That’s set to continue next year, though President Joe Biden’s child-care and clean-energy investment plans will limit the drag if they make it through Congress.

What Could Go Right in 2022?

Not every risk is to the downside. U.S. budget policy, for example, could remain more expansionary than appears likely right now — keeping the economy away from the brink of the fiscal cliff, and boosting growth.

Globally, households are sitting on trillions of dollars of excess savings, thanks to pandemic stimulus and enforced frugality during lockdown. If that gets spent faster than expected, growth would accelerate. 

In China, investments in green energy and affordable housing, already slated in the country’s 14th Five Year Plan, could amp up investment. Asia’s new trade deal, the Regional Comprehensive Economic Partnership— which encompasses 2.3 billion people and 30% of global GDP — could boost exports.