Another year is coming to an end, 2021 has brought us interesting things in the asset management industry, but it has also brought the major inflation in the last 25 years, the rising of the commodity prices, and supply bottlenecks around the world. With this in mind, we take a deep breath thinking on what will come in the new year, and of course, where will be best to invest in 2022?
As always we have received the insights and forecasts from professionals within the asset management industry on what we can expect from 2022 in the financial sectors, and which will be the best asset allocations for 2022.
|Asset Management company||Forecast for 2022|
|Jupiter AM||– Continuation of uncertainty in the markets|
– Questions marks about leisure, shops
– The supply issues will improve in 2022, but it won’t be a smooth journey
– The mobility will improve, and the inflation will reduce
– 2022 will look more normal, metrics will be more similar to before the pandemic
– We focus on innovation and sustainable business
– Themes: Green investing, Data, Digitalisation, semiconductores to Europe and US
– Value will start to reflect interest rates, equities
|UBS||– Looking ahead to 2022, UBS recommends investing in mid-caps in the eurozone, Japan and the US|
– Balance cyclical exposure.
– Keeping an eye on opportunities in the healthcare sector.
– Combination of high inflation and low interest rates translates into real wealth destruction for those betting on holding cash or high quality bonds.
– Opportunities for positive real returns in fixed income in segments such as US senior loans, with average yields above 4%, or Asian high yields offering close to 9.5% for three-year maturities.
– Appreciation in currencies exposed to restrictive monetary policies, such as the US dollar, sterling, the Norwegian krone and the New Zealand dollar.
– Investing in disruptive technologies (artificial intelligence, big data and and in the transition to zero carbon emissions.
|Amundi||– Global growth will return to potential after the peak, as cyclical stimuli fade. – – Inflation will prove permanent and uncertain, driven by supply shortages and widespread scarcity. |
– The desynchronisation of growth and inflation trends returns with a vengeance, and globalisation will be affected.
– Central banks will accept to go behind the curve, given their benign neglect of the inflationary narrative.
– The concept of Emerging Markets as a homogeneous bloc is definitely over. The great divide will be into three worlds: 1) countries with inflation and Central Banks acting to control it; 2) countries with inactive (out of control) Central Banks; and 3) China. Investors should favour 1 and 3, where currencies should also appreciate against the US dollar, bearing the brunt of hyper-Keynesian policies.
|Pimco||– The outlook for equities. We remain broadly constructive on equity market risk. We expect to see substantial differentiation across regions and sectors, which warrants a more selective and dynamic approach.|
– Within developed markets, we remain overweight U.S. equities, and have positioned our overweight in cyclical growth sectors.
– We also have exposure to Japanese equities, which tend to have a valuation cushion along with beta to cyclical growth.
– We view European equities as more challenged due to a combination of unfavorable sector composition, energy price headwinds, and growing unease around the COVID-19 outlook.
– In emerging markets, we continue to be constructive on select exposures within Asia. Simultaneously, we are closely monitoring regulatory developments in China and evolving geopolitical tensions in the region. We remain overweight emerging Asia, with an emphasis on hardware technology and equipment that will be foundational to regional as well as global growth.
– From a sector perspective, we retain a preference for secular growth trends like digitalization and sustainability. In particular, we believe that semiconductor manufacturers, factory automation equipment providers, and green energy and mobility suppliers all stand to benefit.
|Pictet||– Cautiously optimistic on equities. Overall, it maintains a cautiously optimistic outlook on equities. |
– As economies reopen and bond yields to maturity rise, he expects cyclical value markets and sectors to outperform. This is the case for Japanese equities, where the recovery should boost corporate profits and margins.
– Value markets in under-frequented areas. Pictet AM sees some value stocks in less frequented areas: energy, mining, Chinese real estate, Brazilian and Turkish equities.
– In addition, it expects cyclical value markets and sectors to outperform in 2022 as economies reopen and bond yields to maturity rise. This includes Japan, financials and US small caps.
– In addition, Chinese technology stocks, which are showing a notable loss of profitability, may recover if China’s regulatory zeal eases.
– Italy and Spain look attractive. It sees Italy as a clear beneficiary of the Next Generation stimulus package, given that its equities trade at a decades-long discount to the rest of Europe and do not yet reflect the optimism already built into its bond market.
– In emerging equities they are very cautious and in emerging market assets in general. The pace of growth in developed markets, especially in the US, is a drag on emerging markets given the risks.
– In addition, thematic investing should remain popular.
|DWS||– Positive long-term outlook for China. India on the upside. The current year’s poor performance is due to four factors: tightening monetary policy in China, new government regulations, a zero-tolerance policy on the coronavirus pandemic and significantly less fiscal support. We see India as a clear winner in the re-opening of Asia and one of the most interesting equity markets in Asia. |
– Positive about Japan. The Japanese economy, and in particular private consumption, has long been on the back burner due to coronavirus restrictions, he noted.
– Chinese equities: the blocking measures could last until the end of the first quarter of 2022. In addition, corporate earnings could be revised further downwards. In the medium term, the outlook is much better, he explained. Going forward, China will put more emphasis on the quality of growth than on quantity.
– Equities: growth driver in decarbonisation. Equities will still be among the top-performing investments next year, but the price potential is significantly lower than in 2021.
– Real estate market: the focus is on affordable and sustainable housing and the new generation of premium offices.
Many of the long-term rents are indexed to inflation: Real estate as an asset class remains attractive in an environment of near or below zero real yields, There are two particularly promising trends: in the residential market, the trend towards affordable and sustainable housing; and in the office market, the trend towards modern, environmentally friendly offices that meet the needs of the next generation (Next Gen Prime Office).
|Schroders||– Inflation remains a concern. Fund managers have long been concerned that inflation may be more than “transitory” and so far the omens are not good. October’s US producer price inflation of 8.6% was a surprise and reflects the impact of price rises across the spectrum, from rising energy and commodity prices to rapidly rising labour costs.|
– Margins will be under pressure in many industries. Corporate profit growth in 2021 has been re markably strong. Record monetary and fiscal stimulus has supported the rapid turnaround in business activity following the approval of Covid-19 vaccines late last year. US companies in the S&P 500, for example, are on track to average $225 per share in earnings in 2021, a 65% increase over 2020.
– Megatrends continue to gain ground. Immediate challenges aside, there are a number of structural factors that are likely to have a major impact on equity markets over the next decade and beyond.
– Conclusion: It pays to engage. The old English proverb “He who does not talk knows nothing” could be applied to investment. And yet it is surprising how infrequently investors and the management teams of the companies in which they invest interact. Traditionally, shareholders have chosen to exercise their views mainly through proxy voting.
|RBA||– We believe that markets are returning to the environment of the 1960s and 1970s.|
– Globalisation, not US monetary and fiscal policies, is the force behind long-term disinflation. Globalisation increases competition, which in turn drives down prices.
– The duration of current supply disruptions already exceeds that of the 1973/74 oil embargo.
– The US labour market is historically strained by numerous measures that put upward pressure on wages.
– 2022 could be the beginning of a new prolonged period of stronger than expected nominal growth. Investors do not seem to be prepared for such an environment and this presents an opportunity.
– We prefer sectors that have historically outperformed when nominal growth has strengthened: Energy, Financials and Industrials.
– Consumer staples could be a good “spare wheel” within portfolios in case growth slows unexpectedly. Non-US equities in countries sensitive to US growth also look attractive.
– Asset classes favoured by an inflationary environment, such as commodities, gold and real estate, could present opportunities.
– In fixed income, we believe that active management will be beneficial relative to passive or ladder strategies.
– Flexible strategies with the ability to switch between quality/duration/credit could be more important.
– The traditional 60/40 portfolio could be affected.
|BNP Paribas WM||– Theme 1– Riding in a new inflation regime|
Fiscal incentives from governments and monetary stimulus from central banks will lead to economic recovery. These measures also lead to much higher inflation than in the last decade and this is likely to continue. To hedge their portfolios against this inflation risk, we recommend investors to invest in inflation linked sovereign bonds, flexible or absolute bond funds, equities and equity funds that may benefit from this higher inflation rate, including cyclical and value stocks, and finally commodities such as precious metals and base metals related to the manufacture of electric batteries.
– Theme 2– Identifying winning investments and innovations
The pandemic has accelerated investments and innovation, thanks in part to massive government investments in renewable energy, infrastructure and the health sector. Individual companies are also investing to boost production and productivity through technology, as well as to implement home-working. In addition, the acceleration of new companies in the United States and Europe
should boost economic growth in the medium term and in turn promote innovation. We recommend investors to buy green bonds, growth-related private equity funds and thematic equities, equity funds and ETFs (digitalization, artificial intelligence, blockchain, cybersecurity but also equipment for mining and oil extraction or in the fields of health and telemedicine).
Theme 3 – Repair, Reuse and Recycle
To protect our planet, it is necessary to better use scarce resources and reduce CO2. To achieve this goal, we need to promote a circular economy, as opposed to a linear economy, which causes waste. The circular economy favors reuse and recycling, while targeting the reduction of carbon emissions. The five sub-themes are: circular sourcing of raw materials, using recycled materials, recycling scarce resources when a product can no longer be used,
extending the product’s life sharing platforms, leasing services (borrowing instead of buying). As part of this theme, we recommend investors to target equity funds and ETFs based on the circular economy, Private Equity funds focused on sustainability, renewable energy funds and finally, green bonds funds to promote sustainable investment.
Theme 4 – Small is (still) beautiful
Today it is interesting to invest in small and mid-cap companies (USD/EUR 5 billion or less) in the United States, Europe and emerging countries. This segment of the stock market demonstrates long-term outperformance around the world as these companies are generally less complex, more innovative and adapt more easily than larger structures. This segment is also experiencing a better exposure to domestic economic growth, which we expected will remain solid in all these regions in 2022. Moreover, in a mature bull market, large companies often look for external growth
opportunities, especially through acquisitions of small companies – even at a premium. Finally, these companies tend towards a higher level of valuation, especially in the United States or Asia. We therefore recommend investing in these companies via actively managed funds and ETFs, via private credit funds and unlisted credit with a higher yield, and also via private equity funds focused on leveraged buyouts and growth.
Theme 5 – Enter in the Metaverse
The Metaverse takes users into a virtual world that connects different digital environments. This is the future version of the internet. The Metaverse brings together several sub-themes such as blockchain, cybersecurity, crossmedia sharing platforms (e.g Google, Meta…), video games and collaborative work software. We recommend investing in this theme via: thematic funds and ETFs which focus on these sub-themes (digitalisation, artificial intelligence, electronic payment, cybersecurity), private equity funds with a technology focus, real estate companies and funds invested in 5G telecommunications towers.