Top five global risks of 2022, stagflation shock to push markets into a downfall – Charles Schwab

Despite the strong year for stocks in 2021, markets have confidently priced in some negative trends gathering more momentum in 2022 that may help the market should these trends reverse. Here are Charles Schwab’s top five global risks for investors in 2022.

Shortages turn into gluts

“Should a supply glut emerge in 2022, it may lead to a fall in inflation with excess inventory prompting price cuts and posing risks to industries that have thrived on the shortage-fueled pricing boost.”

Rate hikes are slower than expected

“Should inflation pressures ease in 2022 as we expect, so may the expectations for the number of rate hikes and the corresponding tightening of financial conditions. Inflation fears may be peaking, along with concerns that central banks may stall the recovery by acting too quickly to raise rates in 2022.”

China goes from cracking down to propping up

“China’s monetary policy is shifting into easing mode, as the rest of the world shifts to tightening. With more stimulus on tap, the news flow on China may go from a focus on a crackdown on some industries in 2021 to propping up other industries in 2022.”

COVID-19 waves may not resemble those of 2021

“Each wave lasts two months and has been driving investors to rotate consistently among these stocks. Yet, this winter’s omicron wave (and future waves) may pose a risk to investors, since they may not be unfolding in the same way in terms of COVID-19 cases or market leadership.”

Geopolitical surprises

“After the globe weathered the COVID-19 crisis without conflict in 2021, the risks of conflict may be higher than expected by the markets in 2022.”