LONDON, Jan 7 Reuters Bet you like on how a post-COVID 19 world might shape up but the global economy is far from any state of normality as we enter 2022.
After the global banking crash in 13 years ago, economists and investment managers speculated about the new normal that will emerge once the epidemic has passed.
The phrase, coined after World War One and used to describe the changed state of affairs after global crises, aims to capture what endures from the blowup to shape a new status quo.
After 2008, the world economy settled into a decade of sub-par growth and non-existent inflation. Rock-bottom interest rates and central bank stimulation boosted asset prices and dampened market volatility - but stagnant real wages fed seething political discontent.
COVID 19 has changed political priorities, placated some angry voters and upended global supply chain dynamics and even geopolitics, and upended some of those angry voters. Some economists predict a roaring Twenties of real wage growth, but also higher inflation, rising borrowing costs and more economic volatility.
There is little doubt that there is high growth and inflation rates right now as economies reboot and some policy supports are wound down.
With vaccines rolled out and supply bottlenecks navigated, this is supposed to be the year in which the dust settles and the real state of the world economy becomes clear.
The persistence of labour markets, retail prices and spending and saving habits make the fundamentals hard to assess as we enter 2022.
The explosion at the turn of the year of the Omicron variant of the coronaviruses - even though confirmed to be milder -- further blurs the picture.
The aggregate effect is complicated by the differences between Britain's ride it out approach to China's zero-COVID lockdowns and Britain's ride it out approach to this latest wave.
The investors outlooks for 2022 have largely stuck with a bullish take on earnings-driven equities, showing a preference for rotating into cyclicals from tech and a wariness of low-yielding bonds.
This week's stock market wobbled on a hawkish turn from the U.S. Federal Reserve showing that confidence in another bumper year is shaky and advice for investors more about staying on the bandwagon rather than going out on a new path.
Jason Draho, head of Asset Allocation Americas, at UBS Global Wealth Management, warned people to be cautious about the data, lower returns and more volatility, especially as any Omicron-linked distortions have yet to emerge.
The market may not look through this economic noise, but that's what it is, he said, adding that growth and inflation figures are likely to get worse in the first two months.
The economy could take over the next 12 months, and the right investment playbook can vary quite extensively between them. This unease about when the COVID coast will clear and what equilibrium might emerge is widespread.
A unique confluence of events the restart, new virus strains, supply-driven inflation and new central bank frameworks are creating confusion, as there are no historical parallels, wrote BlackRock strategists. They claim they have trimmed risk-taking because of the wide range of outcomes.
Before you get to domestic issues - the UK, French and Italian presidential elections, the U.S. midterms, China's common prosperity push and property sector woes, and the energy price impact of Russia's standoff with some neighbours are all covered by that.
Catherine McGuinness, City of London policy chief Catherine McGuinness, said this week that the pandemic was masking the impact of leaving the European Union on Britain's finance industry.
Central banks seem confident that they are rolling back critical care, despite the fact that they seem confident in the landscape. The Bank of England became the first G 7 central bank to lift interest rates after the pandemic and the Fed tapering its bond buying and flagging rate rises ahead.
But anxiety about persistent, even if still distorted inflation spikes may be more motivating for them than faith in a return to normality.
Markets may simply be aping policymakers' playbooks and not making independent assessments, as was clear this week. Although still growing on aggregate, the world money supply and central bank liquidity growth is slowing.
If central banks worry about inflation becoming entrenched, they may stop the whole show.
The Fed still sees inflation returning to 2% over its forecast horizon despite its greater hawkishness this week. The New York Fed's new analysis on historic supply chain distortions reckons these may be close to peaking.
The new normal it seems is still up for grabs.