Several factors worked to push most major global stock indices and markets higher as investors assess economic conditions during the final half of the last month of 2021. In addition to inflation in developed nations and continued problems stemming from the COVID pandemic, other components of the recent surge in across-the-board securities prices included monetary policy decision in Europe, the U.S., and Asia.
Amid multiple trends and differing conditions throughout regional stock markets, online trading volumes soared during December as individuals and institutions continued to bet on tighter monetary policies in the UK, the U.S., and European nations. While no solitary trend or development stood out, the many factors that set the stage for the rest of December and early 2022 include:
- Inflation continuing to influence investors by forcing national governments in places like Norway, the U.S., and the UK to hike their interest rates or give indications that they would soon be doing so. For its part, the U.S. Federal Reserve Bank reined in stimulus activity and gave every hint that it would raise rates at least three times next year.
- Turkey’s leaders went in the opposite direction, choosing to continue with stimulus and lowering interest rates, both moves which worked against that nation’s official currency, the lira, which dropped precipitously in mid-December and isn’t looking to recover any time soon.
- Notably, the newest COVID variant, Omicron, has had little to no effect on international markets. That’s a major difference from earlier scenarios, in which each new form of the virus sent indices downward, at least initially. Several governments, particularly the UK, have introduced fresh travel rules and movement restrictions on its citizens. So far, even the most draconian COVID rules have not affected December’s worldwide securities marketplaces.
- Energy and tech stocks were behind a slight increase in the STOXX 600 listing, a measure of pan-European issues. Likewise, with Great Britain and the U.S. set to raise key interest rates, indices in both those nations rose significantly in mid-December.
- Goods and labor supplies continue to suffer, especially in the UK. As the omicron COVID variant spreads, both of those supply-related problems are likely to become much worse. It’s also probable, based on official government announcements, that Great Britain’s Monetary Policy Committee as well as the Bank of England will raise rates in early 2022 in an attempt to stifle inflationary pressures.
- The U.S. Federal Reserve Bank announced its expectation that unemployment rates won’t rise significantly between now and mid-2022, that inflation will subside, and that the latest permutation of the COVID virus will not have a profound impact on the nation’s economy.
- The Fed’s chairman, J. Powell, indicated that the governing body does not see the need for more fiscal support in the form of stimulus or low interest rates. As long as the economy is growing, higher interest rates in the U.S. and elsewhere are not viewed as a significant threat to key indicators or overall fiscal health.
- If inflation, unemployment, interest rates, long-term COVID effects, and political turmoil continue to play no major role in the health of year-end securities markets, it’s likely that any large downturns would take place in either the first or second quarter of 2022.