I’m a bit late with my financial predictions for 2022. I hope you’ll forgive me but COVID finally had its day in the Wise household in December and January, and blog writing took a back seat for a couple of weeks.
Around this time of year, the press like to predict what will happen in 2022. There are forecasts of global economic collapse, huge growth, stockmarket crashes and booms. The last article I read managed to forecast high inflation, deflation and stagflation for 2022! The bad news usually takes the most prominence, as it sells more newspapers and encourages more clicks. This is the time of year when we hear about the funds and shares to watch for 2022. It’s all a bit of fun, designed to sell more papers and to get us to click on more websites.
I’m confident in my predictions so I am happy to post them here. However, for what might seem obvious reasons, I don’t think my forecasts will be headline news!
- Asset prices will be unpredictable. It remains impossible to forecast what the price of any asset will be, particularly over a short period, like a year. It’s completely pointless doing it. What we do know is that, over the long term, you are rewarded for taking risk with higher potential returns.
- There will be emergencies and surprises. You may have put together a plan, but neither you nor I can predict the future. There will be some emergencies, and there will be some surprises (as I found out when my son surprised me by testing positive for COVID in Spain, triggering an emergency!). Your financial plan is not complete unless it can deal with these surprises – good and bad.
- You will get older. Another year will pass, leaving you with less time to save for the future or less time to spend the money you have saved. Don’t delay! The good news from your financial planner is that, if you do become a year older, your life expectancy won’t have reduced by a year. But the bad news is that this is one of my worse predictions – I should have written that you will probably get older.
- The tax year will end on 5th April. And the reactions will be the same, from the same people. Some will still be trying to pay money into their ISA at 23:30 on 5th April, while others will want to make their payment at one minute past midnight. The same goes for pension contributions. For retirees, in particular, it can be important to take money out of your investments before the end of the tax year, in order to make the most of any tax saving.
- There will be a budget. Prior to the budget, there will be a lot of speculation about what the Chancellor will do. A lot of people will predict that there will be tax rises and that tax-free cash will be removed from pensions. The reduction or removal of tax relief for pension contributions will be predicted. Nearly all of the budget predictions will be wrong.
The best thing you can do is to ignore short-term predictions. Any financial predictions for 2022 will just be guesses, most likely designed to entice you to buy something.
The type of predictions you can rely on tend to be long-term in nature and pretty dull. Financial planning will always be sensible and boring!
Philip Wise | email@example.com
Managing Director and Chartered Financial Planner