As we now put an extremely turbulent year behind us, it seems harder than ever to reliably forecast what the New Year will bring. Even two years on, we are still completely in the grip of the pandemic and there is no end in sight.

The financial markets have so far managed to ride out this crisis very well, however, and last year our assets under management remained on a positive trajectory.

One major problem for the global economy stems from last year’s sharp rise in inflation in many countries. In the USA, prices in November were 6.8% higher year on year; in Germany, they were up by 5.2%. By contrast, inflation in Switzerland remained low at 1.5%. Inflation that remains persistently high over a relatively long period reduces the purchasing power of incomes and forces central banks to fight back and hike interest rates sharply. But after decades of falling interest rates, there are major risks associated with a sudden monetary policy turnaround.

Ever lower interest rates have propped up assets such as real estate, equities and bonds and facilitated public and government debt. If interest rates do rise sharply again, these assets are likely to plummet and private- and public-sector debt will become a problem.

The crises of recent years have prompted governments to implement extensive bailout measures so as to prevent a global economic crisis like that in the 1930s. But this has led to massively higher debt piles. In light of the low level of interest rates thus far, and because they have been lower than economic growth, this debt has hardly been a problem. As interest rates rise, however, so too do debt service costs, which would have negative repercussions, especially amid low economic growth.