2022 ripped up the short-term investment norms of the past decade as surging inflation and soaring interest rates took centre stage. While this caused particular challenges for treasurers, new opportunities to maximise results from excess cash have emerged for the year ahead.
The short-term investment space has witnessed both volatility and an upward momentum over the past year. Soaring inflation coupled with aggressive central bank interest rate hikes have dramatically shifted the landscape for corporate investors. Crucially, inflation has been much more resilient than many anticipated at the start of 2022.
Daniel Farrell, Director, International Short Duration, Fixed Income, Northern Trust Asset Management (NTAM), comments: “There’s been a significant rise in inflation, and not just in the US, Europe, and UK, it has been global. It has proved a lot stickier than some expected at the beginning of last year, largely due to consumer demand and the war in Ukraine.”
The Covid-19 pandemic triggered huge levels of government support through different forms of stimulus. That, in turn, helped build up consumer savings. “In some cases, the government support went too far,” reflects Farrell. “In the case of the US, it was too large and too long. This fuelled the rise in consumer demand.”