2022 under review

At the beginning of 2022, we identified some topics that could have an impact on the year that is now ending: covid, inflation, interest rates, nationalization/globalization, geopolitical conflicts and energy transition. Among all these topics addressed, three clearly stood out as the most relevant of the year.

geopolitical conflict

In January, when we wrote the article, we were still unaware of Russia’s intention to invade Ukraine. Undoubtedly, this position taken by Putin ended up marking the year in a negative way, for many reasons. The first, because war will never be a solution, in a war everyone loses. In the most important, lives are lost, homes and cities are destroyed, feelings of anger, hatred and frustration are generated. On the economic side, this conflict gives rise to enormous difficulties for those involved in it, but not only. We live in a global world, where everyone interacts with each other. As Russia and Ukraine are two countries with great energy relevance, this conflict turns out to have a much greater economic dimension, with greater impact in Europe.

Inflation

During the 21st century and until 2022, inflation has always been a relevant but controlled issue. The emergence of covid, all the uncertainty that arose and the widespread confinements forced monetary authorities and governments to intervene heavily in the economy. Thus, the support generated and the credit facility promoted by central banks generated enormous liquidity in the economy and financial markets. This message passed to consumers, who exhibited consumer behaviorfor two different reasons: The first is justified by the high rush to consumption in the post-confinement; the second had to do with the credit facility for families and companies which made this whole movement even more effusive. To complement this, consumption increased, but production did not, which means that the effect of rising prices was mainly by the increase on the demand side.

interest rates

Over the last two years, we have been alerting to the fact that the monetary authorities are not analyzing the data in due detail, since inflation would be a natural process depending on the information/indicators that would be available. With prices escalating and the cost of living standards rising, monetary authorities were forced to accelerate interest rate hikes. In the US, throughout this year, the American Federal Reserve raised the reference rate by 4%, while the ECB rose by 2.5%. At the moment, the monetary authorities are chasing the damagetrying to calm the economy and regain control of inflation, so that the cost of living remains more stable.Read more: ECB raises interest rates again and warns that increases will continue

Volatility

This was another keyword throughout 2022. financial markets had a negative year, heavily supported by the three themes identified above, with assets showing large fluctuations. As an example, the cryptocurrencies that had been generating the interest of many investors, suffered considerable declines and, at this stage, are a topic with much less relevance than a year ago. Equity markets also presented double digit correctionsthe same happening with the bond segment, which was heavily impacted by the aggressive and generalized rise in interest rates by the various central banks.

Covid and Nationalization/Globalization

These two themes continue to have an important impact on our society. In China, for example, covid continues to condition the total opening of the economy, as the authorities continue to have a zero covid approach, which has greatly conditioned economic activity in China. globalization has also suffered some slowdown, because there are disputes between different blocks that try to condition each other. As an example, the dispute for economic leadership between the USA and China is giving rise to some measures by the American authorities that imply, for example, barriers or tariffs on many goods from China. This setback in globalization may be reflected in the cost of producing many goodswhich, in the limit, could be another focus of pressure on inflation. If we add to this example the emergence, all over the world, of movements/parties that focus their discourse on nationalizationwe realize that we may be in the presence of a deceleration of the globalization process. In short, the year 2022 was difficult and very challenging, with many foci of instability. In economic terms, 2023 will once again be marked by a high volatility and, hopefully, a tendency for inflation to normalize and consequently, the level of cost of living. Uncertainty will continue to be present. It is important that we always have a positive mindset, because opportunities do not choose timings or contexts, they exist and “we just” have to be attentive to be able to materialize them.Read more: The importance of (knowing) saving Passionate about sport and economics, he was a professional football player, having played for clubs such as SL Benfica, Estoril, among others. He reconciled his sports career with his academic career, finishing his degree in Economics at the Faculty of Economics of Universidade Nova de Lisboa (NOVA SBE). He remains connected to his two professional passions, performing the role of Financial Advisor and collaborating as a sports analyst at CNN Portugal. He was a resident commentator on JE’s Jogo Económico program and Chairman of the Supervisory Board of the Portuguese Footgolf Federation. (FPFG). He regularly participates in Financial Literacy events.