Quarterly market round-up
Flash Stats - Q4 2021
07 Jan 2022 - Estimated reading time: 2 minutes
In our regular market round-up, we take a look at what's happened in Q4 2021.
Strong earnings growth helped global equities post positive returns despite rising COVID infections, which have seen GDP forecasts revised lower. Short-term sovereign yields rose as markets moved to price in a faster pace of interest rate rises in the face of rising inflation.
Some of the headlines in Q4 2021 include:
- Economic momentum has slowed with the imposition of restrictions and increasing social distancing. This is expected to weigh on growth in Q4 2021 and Q1 2022, but we still anticipate above-trend growth in 2022.
- Falls in the Purchasing Managers Indices across the US, UK and Eurozone suggest the Omicron variant has slowed service activity. However, global manufacturing sentiment appears relatively resilient, with output increasing despite ongoing supply constraints and rising input prices.
There are signs that the strain on supply chains is easing, though the overall rate of price increases remains near record-highs. UK headline CPI inflation rose to 5.1% year-on-year in November whilst the equivalent US and eurozone measures rose to 6.8% and 4.9% respectively. Rising petrol and secondhand car prices have continued to drive up headline measures but prices are rising in almost all goods and services.
As realised and forecast inflation continue to move higher amid labour market tightening, central banks have adopted less accommodative stances. The Federal Open Markets Committee (FOMC) announced plans to accelerate the tapering of asset purchases, with the median FOMC member forecasting three rate hikes next year. The Bank of England raised rates to 0.25% p.a., with further rate hikes expected in 2022.