With the end of this year full of twists and turns and risks on the economic level, investors are turning their eyes to 2022 with many fears.
In a report published by the French “Cryptonaut” website, writer David Marcel reviews his expectations for the most prominent risks threatening global financial markets during the next year, expecting that high inflation rates, the continuation of the Covid-19 pandemic, and tightening of control over cryptocurrencies are among the most important factors of instability.
1. Fed monetary policy tightening
The writer believes that this issue will dominate the markets in 2022, when the Federal Reserve will begin to reduce the quantitative easing policy, with the aim of ending asset purchases completely in March of the same year.
This most likely means raising interest rates, with the possibility of stopping economic stimulus measures, which will lead to a significant decline in the financial markets if they are not prepared for this scenario.
The problem - according to the author - is that inflation is rising very quickly, which could force the Federal Reserve to raise interest rates early next year, leading to the collapse of US and global stock markets.
2. US debt ceiling
Raising the debt ceiling is an annual tradition in the United States, which allows it to raise the legal limit on the amount it can borrow in the markets to fund the federal budget.
And every year, the debate over raising the debt ceiling leads to a divergence of positions and heated debate, and approval is often given at the last minute, putting pressure on the markets.
If the debt ceiling is not raised in time, the US is forced into a so-called "government shutdown" that cuts many jobs due to lack of funding, with serious economic consequences.
So far, this scenario has not happened at all, but with the exacerbation of ideological divisions in the United States in recent years, the writer does not rule out that this will happen in 2022.
3. Mutant strains of COVID-19
The writer believes that with the emergence of the mutated Omicron strain of the emerging corona virus, the Covid-19 pandemic will continue to play a pivotal role in global stock markets.
Uncertainty remains very high about the future of the epidemic, and it is unclear whether economic and social activity will return to normal next year.
It is not excluded - according to the author - that the emergence of a new mutated strain, a reduction in the effectiveness of vaccines, or the adoption of new strict measures to combat the epidemic, will destabilize the markets during the next year.
4. The effect of leverage strategy
Leverage is a strategy that allows borrowing money from brokers to invest in the markets with a larger capital, and the reliance on it has increased significantly in 2021.
The amount invested in the markets thanks to this strategy has increased by more than 60% this year compared to 2020.
This record high occurred shortly before the dotcom bubble burst, and before the 2008 financial crisis. If history repeats itself, that points to a serious financial crisis on the horizon.
2021 saw an investment explosion in the cryptocurrency market (Getty Images)
5. Chances of Cryptocurrency Collapse
The year 2021 witnessed an investment explosion in the cryptocurrency market, whether by individuals or institutions, which made many central banks issue warnings of the risks of trading in such currencies.
The writer stresses that if the cryptocurrency market collapses, this will affect the decisions of large investors, or lead to chain reactions through what is known as a “margin call.”
According to him, this market faces many challenges and risks, most notably the regulatory challenges, as cryptocurrencies are not subject to strict regulations, and it is expected that the legal framework regulating them will be tightened in 2022, which will put pressure on them, and this may affect the entire global financial system.Keywords: