Investors should anticipate how central banks will respond to the multitude of challenges.
This year’s Nobel Prize in Physics has honored scientists working on systems that help decipher Earth’s changing climatic patterns.
However, according to Reuters, their research will not answer a key question that dominates the financial markets: how cold or hot this winter will be, how this will affect the rise in gas and oil prices, and hence inflation.
Brent futures are currently trading at $ 84 a barrel, and Russian President Vladimir Putin estimates that prices could well reach $ 100.
And while the world has indeed reduced its dependence on gasoline in the 1970s, the International Energy Agency has warned that the energy crisis could spark inflation and slow economic recovery.
Supply chain issues, production barriers and labor shortages fuel fears, meanwhile, that growth could slow enough to lead to a kind of negative scenario.
What will be the political response?
All of the above influence the political response, which is discussed between the optimists and the pessimists.
St. Louis Fed Chairman James Bullard urged the US Federal Reserve to tighten its policy quickly, while the bank’s policy-maker Silvana Tenreyro said an interest rate hike to address the short-term effects of inflation, such as energy prices would be “self-destructive”.
And the concern about inflation remains.
So whoever, according to Reuters, manages to answer this question, can benefit from the market.