2021 was an incredible year in the financial world. We saw stock markets breaking new records, ordinary folks getting extremely rich betting on meme stocks and crypto, inflation raging high thanks to COVID, and weather-induced supply-chain disruptions, to name just a few things.
What can we expect in 2022? The biggest concern on everyone’s mind is inflation. I certainly felt the pain every time I went to Walmart and paid more for less.
Central bankers have also woken up to the reality that higher inflation appears to be more than “transitory.” So this year is going to be the year of rising interest rates.
This is bad news for borrowers, especially if you have floating rate loans. If you do have such loans, look to pay down as much of them as possible, because interest rates are not likely to come back down once they start rising. On the flip side, savers will benefit as their savings earn more.
Higher interest rates have historically meant poor stock-market performance, as investors move money from stocks into safer assets such as bonds. However, if you are investing for the long-term and using a broadly diversified instrument such as an S&P 500 ETF, continue to stay invested and see the bouts of volatility as an opportunity to buy at lower prices. If you need convincing that this remains a viable strategy, just have a look at a 30-year chart of the S&P 500 index.
Economists have forecast more growth for the global economy as the world gets better at fighting COVID and restrictions are lifted. The labour shortage is forecast to last through 2022, so if you’re thinking of getting a part-time job, try negotiating for higher wages.
The rise of digital assets such as cryptocurrencies and non-fungible tokens (NFTs) will likely continue as they gain greater mainstream acceptance. For instance, many businesses now accept Bitcoin as payment, and Sotheby’s auction house has held auctions for NFTs.
Although some cryptos and NFT projects were outright scams, I do believe that digital assets are something that most of us will come into contact with at some point in our lives, so it will be worthwhile for us to learn more about them.
We are likely to see greater volatility in the coming year, but always remember to think long-term when it comes to your financial health. Continue saving and investing, and make an effort to learn about new developments.