Navigating the year ahead
The fiscal landscape of 2021 was full of uncertainties, opportunities, and challenges at times. The global impact of COVID-19 left many wondering how to navigate the economic waters in its wake. As we enter 2022, what market trends can we expect to see?
In the eleventh episode of our Sharing Knowledge Series, host and chief lending officer, Kevin Vonderau, is joined once again by Brian Toma CFP®, AIF®, CEPA managing partner and registered investment advisor at Freeman Heyne Toma Financial Advisors, and Jon Park, executive chairman for Westfield Bank. Together they reflect on the financial trends of 2021 and discuss the economic outlook for 2022.
Below are highlights from this conversation. To dive further into the insights our panel is anticipating for 2022, watch or listen to the full episode here.
Current economy and 2022 predictions
So, what can we expect going into 2022? Our panel agrees that 2022 will yield a strong economy with very low risk of a recession. One of the factors that plays into this sentiment is the Infrastructure and Jobs Act passed in November of 2021. The money committed to the bill helps with the “V-shaped” recovery curve, and the $1.2 trillion will help stimulate the economy by way of materials purchased and new jobs.
- The demand for housing in 2021 was at an all-time high driving up prices. Looking at 2022 prices will start to taper off and housing in general will surface as more expensive than before the housing boom. It’s also likely that the refinance boom will slow as interest rates are projected to rise. Brian points out that this shouldn’t necessarily be viewed as a negative, as he believes the hike to be necessary to aid in economic stimulus.
- The labor shortage is expected to continue into 2022 partially due to “The Great Resignation,” and its lingering impact. In an effort to entice new hires, it is projected that wage inflation will increase. Employers can expect to provide raises between 5-6% to retain current employees. One unexpected trend that arose in 2021, was that of retirees re-entering the workforce. It has been a great way for individuals on fixed incomes to earn extra money, while alleviating the issue of vacant positions. Signs point to this trend continuing into the 2022 economy.
- At the end of 2021, inflation was at the highest it had been in over 40 years. The supply chain disruption added to this inflation hike, and it’s likely that the impact will be felt for months or years to come due to current congestion. One factor that may slow inflation is the incorporation of technology in the workforce, specifically automation.
Business considerations in 2022
Though the economic outlook for 2022 looks positive, there is still uncertainty as we wade into uncharted waters. Businesses may want to consider carrying higher cash balances. As labor shortages continue, it’s worth considering investing in automation, acquisitions, and buying back shares. In advance of a possible interest rate increase, now is a good time to consider refinancing debt.
As Brian advises, “Have a dream team. Have a great advisor, attorney, and bank. Have a team that you trust. They can help drive you to where you want to go.”
Westfield Bank remains committed to providing you with expertise and partnership needed for longevity. Through times of prosperity and times of challenge we are your business’s trusted financial partner. Contact us today to discuss your financial goals and plans.