When people ask me why I remain positive that stocks can head higher this year, it’s got nothing to do with what’s going on now, but what probably will happen with the headwinds hitting and hurting economies, stock markets and confidence.

Those three destructive forces are:

1. Vladimir Putin’s war;

2. China’s continued pandemic-fighting lockdowns; and

3. Inflation, with its potential for giving us too many interest rate rises, which could create a recession.

Yesterday was the wake for veteran journalist Max Walsh, who once taught me that with most economic and market crises, we tend to “muddle through”, meaning we avoid collapses of a Great Depression kind.

If I thought Putin, Chinese and inflation threats would be here and hurting longer than I currently do, then I’d join the pity partygoers, who often scare the pants off investors and even some of my financial planning clients!

Looking at these issues, I think China beating the many strains of the Coronavirus is more likely to happen over this year, which will gradually improve the supply chain problems that are forcing up inflation rates.

When China gets on top of its virus issues, the supply of exports out of the world’s biggest manufacturer will increase, bringing down prices, as well as inflation. And this will not only reduce inflation but also build confidence, production, jobs and so on.

Similarly, the end of the Ukraine war, will not only help the supply of resources it will bring down the price of oil, which will be a big boost to businesses experiencing rising costs and consumers who are spending too much on petrol. Clearly, it will be another plus for reducing inflation over the year.

Of course, the future won’t help the here and now, where inflation is on the rise currently. Next Thursday’s Consumer Price Index should prove that, with the underlying inflation rate expected to be well and truly in the 2-3% band, that the RBA says it needs to justify its first interest rate rise since November 2010!

Today’s SMH shines the spotlight on rising inflation, which experts and retailers say is set to be “intense.”

Big end of town price-setters such as Bega have informed the stock market that their former cost forecasts were way out and too low because of the pandemic.

This adds to Woolworth’s boss Brad Banducci’s prediction earlier this year, that inflation was “live and real”.

The SMH’s Dominic Powell talked to retail expert MST’s Craig Woolford, who warned us to get ready for lots of inflation. “We expect [inflation] to sequentially increase, roughly a percentage point of extra inflation coming through over each quarter for the rest of the calendar year,” he said. “This will affect the cost of food and a lot of non-food items like appliances, hardware and sporting goods.”

I suspect the inflation news headlines will get scarier before we start seeing some relief later in the year. For Australia, our inflation is expected to be less because of the 22 cents a litre cut to the fuel excise for six months. If the war can end before then, we could see a double-dose of help for bringing down inflation.

If China kicks in with better post-pandemic supply, then there will be another help for bringing inflation down.

All this should underpin fewer interest rate rises, which in turn should help stock prices.

This is the best-case scenario and it has a chance of happening. Our stock market has been up 4% in the past month says I’m not the only one out there with a positive view of our future.

Stock markets have a history of trying to invest on what the future is six months down the track, so let’s hope this is an early sign of a better-than-expected future than what current headlines are doing to our confidence.