As society and the economy continues to recover from the impacts of COVID-19, many investors and other interested parties are turning their attention toward the upcoming new year. Although many are looking at 2022 with economic optimism as the economy recovers from the pandemic, financial professionals are predicting some notable trends and concerns to keep in mind as you craft your financial plan for 2022.
Corporate profits:
It’s widely known that corporate profits have a significant influence on the stock market. When corporations release their quarterly earnings, and investors see a high number, the stock rises in value. According to Pollock (2021), Corporate profits are estimated to surge to 43% by the end of 2021. In 2022, however, financial analysts are only predicting a 7% growth, which can have a significant impact on the stock market (para 10).
Real estate market:
According to Brumer-Smith (2021), in 2021, the value of the housing market has reached record highs (para 1). This is largely due to an issue concerning supply and demand. Throughout 2021, there haven't been enough homes to meet the increasing population. The question is whether this will continue into 2022. According to Yale (2021), most experts agree that home prices will not decline. However, the significant uptrend we saw in 2021 will likely begin to slow down in 2022 (para 5).
Inflation:
As we have seen throughout the latter half of 2021, prices for consumer goods have increased. According to Moore (2021), the Fed updated its inflation outlook to exceed 4% in 2021. Therefore, you should account for rising prices in your financial plan for 2022 (para 3).
Labor and supply shortages:
According to Goodman (2021), 2021 experienced supply shortages in many industries due to the pandemic and the labor shortage (para 4). This has caused the prices of many goods to skyrocket. Many investors, understandably so, are concerned about whether or not this will carry on into 2022. According to Winck (2021), economists don’t expect supply chain issues to return to normal until late 2022 (para 10).
As we gear up for the new year and begin outlining our financial resolutions, it’s always wise to analyze the current state of the economy along with the predictions outlined by analysts and experts. Although the factors mentioned above are only a few amongst the plethora of economic factors to keep in mind, we hope it serves as an introductory guide to your pre-planning research. If you find yourself in need of professional advice along the way, our advisors at U-Vest are here to help. We consider personal financial status along with predicted economic trends when creating financial plans for our clients. Let’s talk today to get your finances in order in time for the new year.
Works Cited:
Pollock, M. A. (2021, November 5). Five reasons why the stock market might be weaker in 2022. The Wall Street Journal. Retrieved November 17, 2021, from https://www.wsj.com/articles/reasons-why-stock-market-weaker-2022-11636057425
Yale, A. (2021, November 13). 4 real estate trends to watch in 2022. The Motley Fool. Retrieved November 17, 2021, from https://www.fool.com/investing/2021/11/13/4-real-estate-trends-to-expect-in-2022/
Brumer-Smith, L. (2021, November 16). Are real estate prices going up in 2022? The Motley Fool. Retrieved November 17, 2021, from https://www.fool.com/investing/2021/11/16/are-real-estate-prices-going-up-in-2022/.
Moore, S. (2021, September 23). Fed Ups Inflation Forecast, may raise rates in late 2022. Forbes. Retrieved November 17, 2021, from https://www.forbes.com/sites/simonmoore/2021/09/22/fed-ups-inflation-forecast-may-raise-rates-in-late-2022/?sh=5fc257c466ee.
Goodman, P. S. (2021, October 22). How the supply chain broke, and why it won't be fixed anytime soon. The New York Times. Retrieved November 17, 2021, from https://www.nytimes.com/2021/10/22/business/shortages-supply-chain.html.
Winck, B. (2021, November 5). The labor shortage could be over in 8 months - and just in time for Democrats' critical midterms. Business Insider. Retrieved November 17, 2021, from https://www.businessinsider.com/jobs-report-october-democrats-midterms-economic-recovery-labor-shortage-healed-2021-11.
This article is meant to be general in nature and is not intended, and should not be construed as personal advice of any kind. Please consult your financial advisor prior to making financial decisions. Michael P. Davino, CFP® is a Financial Advisor with U-Vest Financial®, a separate entity from LPL Financial and can be reached at 850.300.7055. Securities and advisory services are offered through LPL Financial, a registered investment advisor, Member FINRA/ SIPC.
(12/21)