What may be the key drivers of market performance in 2022?

Investors are sharing their concerns whether the financial markets will continue to rise in the new year and to what degree, following a significant run-up in 2021, with inflation and monetary policies becoming the key themes for 2022.

Global markets ended the year to near records, led by the reopening stocks which were supported by the immense fiscal and monetary stimulus, the zero interest rates, and the robust corporate earnings.

However, it was the commodity sector that outperformed last year, with the prices of crude oil, natural gas, coal, and industrial metals skyrocketing to decades highs on strong demand and inflation hedging.

2022 starts with the same uncertainties, much like 2021, including but not limited to the impact that the highly mutated Omicron variant imposed on the economy, the ongoing supply disruptions, the battle with the record-high inflation rates, and the monetary decisions from policymakers.

Financial markets are waiving off a prolonged period of zero interest rates, which allowed economies and stocks to recover from the pandemic, leaving investors questioning wether the economy will be strong enough to withstand rate hikes.

The Federal Reserve and other major central banks are expected to hike interest rates multiple times and taper asset purchases in 2022, in response to surging inflation driven by pandemic stimulus programs.