ECONOMIC AND MARKET OVERVIEW
Global
2021 saw most developed countries emerge out of their pandemic lockdown related recessions while emerging markets continued to struggle with vaccination roll outs.
The discovery of the Omicron variant of the Covid-19 virus gave investment markets a scare in the last quarter, however despite the jitters they recovered to end the year very strong. Alongside the global pandemic two other themes emerged, both of which are likely to influence investment decisions in the next few years. Whether inflation will be temporary or more permanent is on the agenda of most investment meetings, and the influence of a move to net-zero carbon emissions will continue to enjoy more time in the limelight.
According to the Blackrock Investment Institute’s 2022 Outlook, the powerful restart of economic activity (seen in 2021 will be delayed – but not derailed – due to new virus strains. Central banks will start to raise rates but remain more tolerant of inflation. They see inflation settling above pre-Covid trends which implies that we’re going to be living with inflation for some time.
Blackrock also sees climate change and the race for the world to reach net-zero emissions by 2050 play into the complexity of investment markets. They view the transition as a supply shock contributing to higher inflation and playing out over decades. They make it clear that the navigation to net zero is not just something that will start in the future-it’s happening now. Supply shocks are here, and the tectonic shift toward sustainable investing is already playing out.
