Inflation, China and Ukraine, emerging markets, and corona are still variables
As the world experienced the stock market crashes in 10 years this year, attention is focused on what the global stock market will do next year. Optimists believe that next year China will face a full reopening rather than a lockdown and central bank interest rate hikes will subside. Pessimists, on the other hand, fear that risks still exist and that they could send the market into turmoil again.
Whether it’s a pink outlook or a gray outlook, the factors that dragged stock markets down this year are likely to remain in place next year. On the 29th, Bloomberg News saw inflation fixation, continued corona crisis in China, worsening war in Ukraine, stagnation in emerging markets, and a resurgence of Corona 19 as risks that could come again next year.
Inflation will continue to be fueled by rising wages and energy costs
Matthew McLennan, global value manager at First Eagle Investment Management, said, The bond market expects inflation to stabilize considerably within 12 months, but that may be a mistake.
There is a real risk that supply-side pressures, such as rising wages and rising energy costs, will continue to fuel consumer price increases. This will lead to further declines in stocks and bonds, a stronger US dollar, and more pain in emerging markets. The stock market crashes in 10 years this year.
Markets expect China’s economy to bounce back through a full reopening, but even this may not turn out as expected. Chinese stocks surged about 35% from the October downturn on expectations of a full reopening of economic activity.
But there is still a risk that a surge in COVID-19 infections will overwhelm the healthcare system and collapse economic activity. China’s infection curve will rise and peak in a month or two after China’s Lunar New Year.