Everyone expected strong economic recovery in 2021 thanks to COVID-19 vaccinations. But unfortunately, that was not the case. Thanks to new COVID variants, we still have to live in fear even though we hoped that things would go back to normal. The bottom line is that we have to adjust. That applies to our professional lives too. Following the latest trends can be of great help for investors who want to anticipate the change and adjust accordingly. Let’s see what lies around the corner for investors in the days to come.
Crude oil and US Treasury yields have moved in lockstep during the previous five years. This connection makes sense for the most part. Both crude oil prices, which reflect global demand, and US Treasury yields are real-time global economic indicators.
Crude oil, unlike Treasuries, is sourced from a variety of countries. Each with its own set of production costs as well as economic and political objectives. Temporary pricing distortions occur as a result of this.
Furthermore, OPEC, a group of several oil-exporting countries, and other non-members, such as Russia, try to manage their supply in order to keep prices stable.
Crude prices cascaded lower in certain scenarios, both in late 2015 and this week, not fully due to demand destruction, which would have indicated weaker global growth. But rather due to a supply excess from Saudi Arabia with the goal of cementing and increasing its market position.
Investors should be careful and follow the relationship between oil prices and Treasury yields. There is a possibility of a new spigot opening again, so make sure to know this before you invest.
What direction will the pandemic winds be blowing?
There's anticipation that everything will return to normal in 2022. Thus, propelling tourism, commercial real estate, and traditional retail stocks even higher. But we've heard that narrative before.
In 2021, Delta shattered the fantasy. As the year progresses, Omicron's emergence raises both short- and long-term concerns. What about the next one, even if this one doesn't cause another wave of devastating infections? The final chapter of this drama will be written by Mother Nature, not by mankind.
Even if the COVID pandemic hasn't ended yet, the post-pandemic market rally has already begun. That's because most, if not all, of the advantages that can be expected from a fully reopened economy, have already been factored into stock prices.
Today, any U.S. port will have stacks upon stacks of shipping containers waiting to be unloaded or replenished with the merchandise. Supply chain concerns may turn out to be beneficial in the long run. For the first time in a long time, Americans are questioning the rationality and national security consequences of purchasing and manufacturing nearly all of their products abroad.
However, in the short run, it is likely to be detrimental for markets. Even if the virus is thankfully finished, there will be no long-term recovery until supply chains smooth out.
Many countries' bond markets underperformed last year. This shows that bond markets have classified this round of inflation as a one-time event. Many expect price increases to decline over the next few years.
Furthermore, many financial institutions have been investing heavily in long-term debt. Thus, putting even more downward pressure on returns. Bonds are also expected to be under pressure in 2022, owing to rising interest rates. Especially, while the majority of the world recovers from the pandemic.
In 2021, a prominent headline was the marked improvement in the job market. Unemployment in the United States has dropped to 4.2% by November.
However, the figures show an imperfect picture of the real labor market. The United States has yet to reclaim the 22 million jobs it lost during the pandemic recession. It is still millions of jobs short of where the employment market should have been before the pandemic.
Much of the disparity can be attributed to women being forced out of the job market while juggling child care. Not to mention their overrepresentation in industries that were struck hardest by the pandemic.
Companies have been harmed by the fierce competition for workers. This results in greater labor prices and staffing issues. Before the labor market can return to normal, businesses must resolve these challenges.
There is no doubt that a number of factors have already influenced our approach to investing. As a result, investors must be ready for the upcoming changes. Try to make wise investments in order to profit from them.
