COVID-19 fear erupted again towards the end of the year, sparked by the emergence of the omicron form in the United States. During the Christmas season, families and friends gathered in large groups, the weather became colder, forcing people indoors, and hospitals became overburdened with new coronavirus cases. It resulted in a jumbled and chaotic finish to 2021.
However, there are reasons to be optimistic as the New Year approaches. Leaving aside the continued threat of the epidemic and potential new strains, the US economy has remained extraordinarily robust throughout. And there are plenty more reasons to be optimistic about the next year.
Every person’s scenario is unique. Please contact us for an insurance assessment if you feel the need to take stock of your finances and safety nets. The following are observations and projections from a range of financial groups for the economic situation in 2022.
Morgan Stanley’s Chief Investment Officer Lisa Shalett believes that the new infrastructure package coming out of Washington, D.C., will help to maintain fiscal expenditure, enhance labor market participation, and spur the development of new clean energy technology. As businesses adjust to the pandemic, the digitalization of services firms and adaptive technology will become more prevalent. Millennials and Gen Z appear to be shifting away from the savings trend that has typified the last two years and toward increasing spending, particularly in the property market. Indeed, today’s well-capitalized US banks and family balance sheets are in a position to expand lending capacity. 1
The current economic upswing, which began following the March 2020 market crash, has already lasted 20 months. While this recent economic trend can not compare to the record 128-month boom that followed the Great Recession, it is defined by record low unemployment. 2 The unemployment rate declined 0.4 percentage points to 4.2 percent in December. Perhaps even more hopeful, labor market participation increased to 61.8 percent in November, the highest level since the March 2020 lockout. 3
In terms of rising inflation, most economists believe that supply chain interruptions and transportation challenges, rather than a breakdown in economic fundamentals, are to blame. Despite the new spending legislation enacted by Congress, Moody’s and Fitch expect them to have little impact on inflationary pressures. 4
The Federal Reserve, which is in charge of monetary policy in the United States, is a little more anxious. Regardless of the causes of increasing inflation, the Fed said following its December meeting that it will cease net asset purchases in January but keep the federal funds rate target range at 0 to 0.25 percent.
J.P. Morgan investment bank was hopeful in early December 2021 that the epidemic will end in 2022, followed by regular economic and market circumstances. This prognosis is predicated on the company’s view that new COVID-19 prevention and treatment therapies will be widely available — and presumably accepted — alleviating supply-chain constraints. Furthermore, the revival of global competition will keep the growing cost of products under control.
Content prepared by Kara Stefan Communications.
1 Lisa Shalett. Morgan Stanley. Dec. 14, 2021. “How High Will Interest Rates Raise?” https://www.morganstanley.com/ideas/fed-rate-hike-pace-peak. Accessed Dec. 21, 2021.
2 Center for Budget and Policy Priorities. Dec. 20, 2021. “Chart Book: Tracking the Post-Great Recession Economy.” https://www.cbpp.org/research/economy/tracking-the-post-great-recession-economy. Accessed Dec. 21, 2021.
3 Tim Smart. U.S. News & World Report. Dec. 7, 2021. “Decoding December’s Job Gains: We May Be Nearing Full Employment.” https://www.usnews.com/news/economy/articles/2021-12-07/decoding-decembers-job-gains-we-may-be-nearing-full-employment. Accessed Dec. 21, 2021.
4 Chad Stone. Center on Budget and Policy Priorities. Dec. 8, 2021. “Inflation Concerns Should Not Impede Enactment of Build Back Better.” https://www.cbpp.org/sites/default/files/12-8-21tax.pdf. Accessed Dec. 21, 2021.
5 The Federal Reserve. Dec. 15, 2021. “Federal Reserve issues FOMC statement.” https://www.federalreserve.gov/newsevents/pressreleases/monetary20211215a.htm. Accessed Dec. 21, 2021.
6 Nicole Goodkind. Fortune. Dec. 9, 2021. “J.P. Morgan says 2022 will be a great year: COVID’s impact will diminish and the economy will fully recover.” https://fortune.com/2021/12/09/jpmorgan-2022-outlook-great-year-covid-diminish-economy-recover/. Accessed Dec. 21, 2021.