Traders see inflation as the biggest market driver in 2022 – survey

An illustration of U.S. dollars, Swiss francs, pounds sterling and euros banknotes, taken in Warsaw January 26, 2011. REUTERS/Kacper Pempel

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LONDON, Feb 23 (Reuters) – Inflation will have the biggest impact on global markets in 2022, traders said, as liquidity was the main challenge in day-to-day trading for a sixth year, according to an annual client survey institutional by JPMorgan published on Wednesday. .

Around 48% of 718 institutional clients surveyed at the end of November 2021 highlighted inflation as the biggest market driver this year, replacing the global pandemic, which topped the list last year.

Market expectations of impending interest rate hikes have risen since late last year, and hopes the trend would be transitory have faded in recent weeks as major countries have struggled with soaring numbers of inflation.

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Economic dislocation and the pandemic were the next factors considered to have the greatest impact, with each poll at 13%.

“It is expected that this focus and concern will likely lead to more activity and volatility in the market given that inflation has not been a theme for over a decade,” Scott said. Wacker, head of FICC e-commerce sales at JP Morgan, “This continues to reinforce the importance of liquidity and price consistency which continue to work in favor of e-commerce.”

Trading through electronic channels has increased in recent years and traders across all asset classes expect this upward trend to continue over the next two years, according to the survey.

“We had two years of quite unusual circumstances with the pandemic – many customers moved away from the office and into home environments in a very volatile market environment, it was the perfect storm to increase e-commerce” , said JP Morgan’s Wacker. noted.

Mobile trading apps were seen as the top influence in next year’s markets, selected by 29% of traders.

Notably, artificial intelligence and machine learning are expected to overtake mobile technology as top influencers soon, in part because many marketers expect mobile technology to be in place by then, Wacker said. by JP Morgan.

Nearly half of respondents said machine and machine learning would be the most influential factor in shaping the future of trading three years from now, followed by blockchain with 24% of the vote.

Foreign exchange markets beat their bond counterparts in the proportion of transactions through electronic channels, which stood at 69%, according to the survey. Traders expect this figure to rise to 85% by 2023.

Rates and credit traders expect 17% increases in the proportion of trades executed through online trading channels.

“Credit is a new frontier market for algorithm trading, a lot of the new technology emerging is in credit,” Wacker said, adding that JP Morgan trades some corporate bonds using state algos. States, EMEA and Emerging Markets.

Algorithmic or algorithmic trading refers to the use of fast computer software to trade markets. They have become a powerful tool in volatile markets in recent years.

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Reporting by Lucy Raitano Editing by Bernadette Baum

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