“Real inflation is everywhere,” said the chief executive of US investment bank Goldman Sachs during the release of the bank’s fourth-quarter results last week.
Compensation costs jumped 33 per cent in 2021, while they rose by only 8 per cent in the previous year. But it is not only wealthy bankers who are feeling the effects. It seems people around the globe are subject to rising price pressures on a daily basis, with official inflation figures for everyday goods hitting multi-decade highs.
US consumer prices recently increased at their fastest pace in about 40 years, with the headline rate hitting 7 per cent in December. Seven of the past nine releases have come in above analyst estimates. Even when stripping out the more volatile food and energy sectors, prices still registered their sharpest pick-up since February 1991.
This kind of surging consumer price data has also been reported in Canada, the UK, Germany and Japan, with booming demand and supply-chain bottlenecks continuing to persist into 2022.
The fragile nature of the just-in-time approach to global manufacturing has been laid bare and there will, no doubt, be much ongoing discussion to dig deeper into one of the principal issues coming out of the Covid-19 pandemic.
Omicron has continued to unsettle the recovery, although there is light at the end of the tunnel. But the rotation from goods spending to services spending will be crucial in relieving some of the stress in goods prices. This is because costs are currently being driven mainly by supply issues and not excess demand.
Although many economists believe these once-in-a-generation price rises will ease in time, they still see costs elevated over the course of this year. When we have been used to annual increases in cost of living at less than 1 per cent, the shock is real.
Markets have adjusted to this new reality by quickly realising that monetary policy tightening is inevitable in 2022.
The rapid catch-up by policymakers and, more particularly, the subsequent run-up in rates have some similarities to the first quarter of last year
Hussein Sayed,
chief market strategist, Exinity Group
The US Federal Reserve has shifted its former “transitory” stance on inflation in double-quick time and is willing to raise interest rates earlier and faster than previously thought. Traders have now priced in four 25 basis point rate increases for this year, starting in March.
The pace of bond market moves have been astounding. Last March, Fed policymakers were still saying it would be 2024 before they would start moving interest rates higher. In June, Fed officials advanced it to 2023 and, in September, they changed it to 2022 and indicated there would only be one rate increase.
The rapid catch-up by policymakers and, more particularly, the subsequent run-up in rates have some similarities to the first quarter of last year. Then followed a steady fall into the summer months.
Could we see this scene play out again if supply-chain disruptions ease and the Omicron wave subsides? Inflation expectations have been more stable recently, with China factory prices and a US factory activity expansion, for example, increasing at a slower pace than analysts expected.
However, with emergency liquidity currently being withdrawn, highly valued, expensive parts of the market are still exposed to broad, sharp sell-offs. Technology stocks are already being heavily sold, with the tech-heavy Nasdaq index in correction territory since falling 13 per cent from its December high.
The current rotation towards value stocks is expected to continue in this environment, with volatility remaining elevated. This means active stock picking appears to be the name of the game in equity markets, with a focus on companies that can deliver dividends and buybacks.
But risks of a broader correction in equities in the first half of the year, as the policy punchbowl is finally withdrawn, loom large as investors protect capital gains from the previous bull run.
Hussein Sayed is the chief market strategist at Exinity Group
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Key facilities
- Olympic-size swimming pool with a split bulkhead for multi-use configurations, including water polo and 50m/25m training lanes
- Premier League-standard football pitch
- 400m Olympic running track
- NBA-spec basketball court with auditorium
- 600-seat auditorium
- Spaces for historical and cultural exploration
- An elevated football field that doubles as a helipad
- Specialist robotics and science laboratories
- AR and VR-enabled learning centres
- Disruption Lab and Research Centre for developing entrepreneurial skills
Kanguva
Director: Siva
Stars: Suriya, Bobby Deol, Disha Patani, Yogi Babu, Redin Kingsley
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UAE currency: the story behind the money in your pockets
SPEC%20SHEET%3A%20NOTHING%20PHONE%20(2A)
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T20 World Cup Qualifier A, Muscat
Friday, February 18: 10am - Oman v Nepal, Canada v Philippines; 2pm - Ireland v UAE, Germany v Bahrain
Saturday, February 19: 10am - Oman v Canada, Nepal v Philippines; 2pm - UAE v Germany, Ireland v Bahrain
Monday, February 21: 10am - Ireland v Germany, UAE v Bahrain; 2pm - Nepal v Canada, Oman v Philippines
Tuesday, February 22: 2pm – semi-finals
Thursday, February 24: 2pm – final
UAE squad: Ahmed Raza (captain), Muhammad Waseem, Chirag Suri, Vriitya Aravind, Rohan Mustafa, Kashif Daud, Zahoor Khan, Alishan Sharafu, Raja Akifullah, Karthik Meiyappan, Junaid Siddique, Basil Hameed, Zafar Farid, Mohammed Boota, Mohammed Usman, Rahul Bhatia
All matches to be streamed live on icc.tv
Coming soon
Torno Subito by Massimo Bottura
When the W Dubai – The Palm hotel opens at the end of this year, one of the highlights will be Massimo Bottura’s new restaurant, Torno Subito, which promises “to take guests on a journey back to 1960s Italy”. It is the three Michelinstarred chef’s first venture in Dubai and should be every bit as ambitious as you would expect from the man whose restaurant in Italy, Osteria Francescana, was crowned number one in this year’s list of the World’s 50 Best Restaurants.
Akira Back Dubai
Another exciting opening at the W Dubai – The Palm hotel is South Korean chef Akira Back’s new restaurant, which will continue to showcase some of the finest Asian food in the world. Back, whose Seoul restaurant, Dosa, won a Michelin star last year, describes his menu as, “an innovative Japanese cuisine prepared with a Korean accent”.
Dinner by Heston Blumenthal
The highly experimental chef, whose dishes are as much about spectacle as taste, opens his first restaurant in Dubai next year. Housed at The Royal Atlantis Resort & Residences, Dinner by Heston Blumenthal will feature contemporary twists on recipes that date back to the 1300s, including goats’ milk cheesecake. Always remember with a Blumenthal dish: nothing is quite as it seems.
Labour dispute
The insured employee may still file an ILOE claim even if a labour dispute is ongoing post termination, but the insurer may suspend or reject payment, until the courts resolve the dispute, especially if the reason for termination is contested. The outcome of the labour court proceedings can directly affect eligibility.
- Abdullah Ishnaneh, Partner, BSA Law
Match info
Uefa Champions League Group C
Liverpool v Napoli, midnight
Jetour T1 specs
Engine: 2-litre turbocharged
Power: 254hp
Torque: 390Nm
Price: From Dh126,000
Available: Now
UK-EU trade at a glance
EU fishing vessels guaranteed access to UK waters for 12 years
Co-operation on security initiatives and procurement of defence products
Youth experience scheme to work, study or volunteer in UK and EU countries
Smoother border management with use of e-gates
Cutting red tape on import and export of food
