How should investors plan for the short-term risk in the post-pandemic market?

Patrick Saner, Head Macro Strategy at the Swiss Re Institute, discusses the big-ticket items for investors to watch out for over 2022 from geopolitical tensions to inflationary pressures.

Andrew Putwainposted on Thursday, March 03, 2022

Patrick Saner, Swiss Re Institute

Patrick Saner is speaking at the Insurance Investor Live, DACH 2022 conference on Thursday, September 29. He will present a keynote session on updating scenario planning in the post-pandemic environment specifically around changing inflation expectations and shorter duration risk. You can see the agenda and book your place to attend the conference here.

Andrew Putwain: With general consensus that inflation could stay at 5%+ for the rest of 2022 what are the signals that investors should be looking out for, in terms of pressures or possible problems?

Patrick Saner: Inflation will remain higher for longer, even more so due to higher oil prices on the back of geopolitical tensions.

Particularly in the US, though, the macro backdrop had pointed to economic overheating for a while. US labour markets are extremely tight, and wages are increasing – besides geopolitics and oil prices, this is a key area to watch, not least since it will have an effect on how much the US Federal Reserve will tighten its policy.

Inflation will remain higher, even more due to higher oil prices on the back of geopolitical tensions

Andrew: A number of economic and social events have shown investors exposure to short term risk in recent years - how much should investors care and plan for short term scenarios?

Patrick: Taking a strategic and long-term view is of utmost importance. But many events of this year already show that one has to be nimble and able to adjust plans quickly if warranted. If true paradigm shifts play out – be it on geopolitics, on structural inflation, or elsewhere – investors should take this into account also for their longer-term outlook.

Taking a strategic and long-term view is of utmost importance

Andrew: Are there market forces post-pandemic that are unique to the DACH region that investors should be mindful of?

Patrick: This primarily relates to the interest rate outlook. In the US, the Fed will raise interest rates because inflation is not only high due to oil prices and supply shortages but is becoming increasingly broad based as well. But one shouldn't extrapolate Fed rate hiking to mean that the ECB will hikes rates aggressively as well. In the Euro Area the situation is different: inflation is high primarily due to elevated commodity prices and supply chain issues, whilst wage pressures are more muted than in the US. This aside, geopolitical tensions will likely also shape the European economic outlook more than the US.

In the US, the Fed will raise interest rates

Patrick Saner is speaking at the Insurance Investor Live, DACH 2022 conference on Thursday, September 29. He will present a keynote session on updating scenario planning in the post-pandemic environment specifically around changing inflation expectations and shorter duration risk. You can see the agenda and book your place to attend the conference here.

 

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