What To Expect?
The highly transmissible coronavirus variant sent global markets crashing. Most countries have announced restrictions and partial lockdowns in view of Omicron. Even though initial evidence points out that Omicron is not as deadly as COVID-19, it cannot be denied that the virus is rapidly infecting people.
Another big threat is supply chain disruptions. Yes, it was one of the biggest reasons for the stalled global recovery last year. In 2022, the logistics constraints will continue to pressurise the cost of the raw materials. This will have a big material impact on the semiconductor industry, which is already reeling with high demand and low supply.
The other two big threats that are concerning are inflation and geopolitical tensions. Global inflation is caused by input shortages and high energy prices. This has pushed inflation to multi-year highs, which are spooking global investors. With continued supply chain disruptions, inflation is expected to be hot in 2022. Now coming to geopolitical tensions, the relation between the US, Russia, and the European allies are not in good shape. Russia is looking to invade Ukraine, but the US is standing in between. US-Russia relations are hanging on a loose thread, if things go out of hand, then the Eastern NATO allies could go on war. Meanwhile, the US and China have also been fighting over Taiwan.
Why Should You Care?
Well, these tensions are definitely going to put massive pressure on India and its stock market. The economic recovery in India has been stalled, especially after the Omicron wave. In India, the cases have risen to over 30,000 fresh infections, which have forced the centre to apply restrictions. This means declining cash flows for businesses and less household spending. All of these microeconomic decisions will have a greater negative impact on the economy giving a direct blow to the stock market.
What Lies Ahead?
The argument now is will things get back to normal as they did earlier or will it be different this time? Well, history indeed repeats itself, but not necessarily in the same pattern. 2022 can be a challenging year, but not necessarily like the one two years back. This time the challenges are different, and so are the solutions. As long as all countries realise the importance of survival, a lesson we learned from the past, we will have a great year.
