While the pandemic-related economic slowdown is over, the fallout from government support measures and central bank policies could pose a challenge for investors this year. They come to this conclusion analysts from XTB in their current special report to the capital market in 2022. Aid packages and negative interest rates have recently triggered enormous demand in all sectors of the economy. However, this surge in demand could not be met in many cases due to corona restrictions and the interruption of supply chains. This leads to higher prices and inflationary pressure that cannot be reduced in the short term.
the XTB experts Against this background, recommend investors to adapt to a completely new environment. Conventional cycle models can only inadequately explain economic development and are therefore being replaced by wishful thinking. The predominant growth estimates for the economy in the industrialized countries of 4 percent this year are “relatively optimistic”, it says special report. “At the same time, some economists seem to believe in a temporary nature of inflation, as they expect inflation to be subdued in the eurozone and China and to gradually cool in the US.”
The market is pricing in the fact that producers can meet the increased demand without government support. The result would be a long and stable expansion. Contrary to this consensus, XTB analysts do not rule out stagflation either. They think it is possible that the inflation-related loss of purchasing power and the diminishing effect of government support measures could lead to a fall in demand. In view of the high production capacities, this could slow down the economy.
Money market policy will therefore play an increasingly important role in developments this year. The central banks have stuck to their emergency programs for longer than necessary. Now very strong demand, low unemployment rates and inflation above 6 percent meet interest rates around 0 percent and continued asset purchases. The resulting excess liquidity can only be reduced slowly and limits the central bankers’ room for maneuver in the event of a crisis.
According to estimates by the analysts of XTB also have consequences on the stock market. Here the most important key figures pointed to a massive overvaluation of the company stocks. Both the US S&P and the DAX have price-earnings ratios that surpass those of the dot-com bubble era. The experts therefore expect significant corrections, for example, the more bond markets become a profitable investment alternative again.
the special report on XTB’s capital market assessments for 2022 also analyzes the possible development of the EUR/USD exchange rate and considers the prospects for gold, oil and cryptocurrencies as investment alternatives. The full version is available online and free of charge: