The pandemic has sparked a somewhat unbridled economic response that the UK government is trying to tame. However, the side effects could spell disaster for retirement savers in 2022, prompting David Woodward, founder of Woodward Financials, to share which of these will have the greatest impact on retirement and investment portfolios.
Mr Woodward said that while the pandemic was still a cause of financial concern, it was no longer the biggest problem for consumers.
He noted that the short-term volatility, where the markets sporadically rise in a short period of time, is due to announcements of new variants and geopolitics.
Mr Woodward commented, “The pandemic and its variations are an obvious cause for concern, but nowhere near the greatest risk to your capital. When a worrying variant was announced, short-term volatility was observed. “
As new flavors are discovered, investors can get cold feet quickly on some of their riskier or geographic assets, causing the initial downturn in some markets.
However, Mr Woodward pointed out that once investors realize that the situation is not as bad as it initially seemed, they will regain their lost confidence and go back to their normal investment practices.
These constant drops and spikes in the market have deterred many from starting their investment journey with the money they saved during the lockdown and for obvious reasons.
This can mean trouble for long-term investors who are holding out, for example those with pensions invested.
Shared some hope for people in this situation, Mr. Woodward noted, “We have come a long way with multiple vaccines and antivirals.
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“Coupled with the likelihood that most viruses would fade over time, that would likely push the risk scale lower with each passing month.”
This prediction offers savers something to look forward to when the world economy returns to normal.
Between interest rates and inflation, however, Mr. Woodward warned that if the effects are properly mitigated, a “domino effect” could set in.
He noted that these were “two major areas of concern” and said that Mr. Woodward believes that interest rate reduction measures and investor perception require due diligence and not like other decisions made during the pandemic.
He shared, “Without care and attention, done wrong, we could see a ripple effect affecting industry and all levels of society.
“Mistakes can be made, but a mistake in overcoming a pandemic would be biblical so you need to rank this higher on the risk scale.”
Mr. Woodward added that investors and retirees savers must now incorporate “galloping inflation” into their risk scales and calculations.
“This has always been an ugly head, the money supply is the main cause of inflation and we saw this at insane proportions in 2020.”
Inflation currently stands at 5.1 percent, a 10-year high, and is forecast by some to climb as high as six percent next year.
The majority of these inflammatory economic responses can be traced back to the pandemic, and Mr Woodward believes it could have been treated better.
He said, “Experts knew the pandemic would last two or three years, so it could be said that the vacation program could have been better managed.
“This may have contained the widespread fraud and overpayment of the vacation program, thus minimizing the impact of future tax increases on the UK public.”