Weekly market – Investors will have to ‘pull the rapids’ in 2022 (read and listen)



Listen to the podcast with Daniel Morris, Chief Markets Strategist, as he discusses the investment outlook and possible direction for macroeconomic policy as it seeks to address the social and economic challenges laid bare by the Covid. Or read our outlook summary below.


MACROECONOMICS AND MARKETS

This section highlights our view that:

• While some production constraints will persist until 2022, they will ultimately be resolved, allowing economies to return to trend growth rates without generating permanently higher inflation.

• The substantial accumulated savings of households means that consumers have the resources to embark on a spending frenzy that could have inflationary consequences. If, however, the aftermath of a global pandemic inhibits consumption, central bank and state support may be needed to encourage demand.

• We expect the momentum behind rising wages to wane as employers adjust their processes and invest capital to reduce their reliance on labor. The current relative weakness of the organized workforce means that comparisons with the 1970s are inappropriate.

• Equities will struggle to generate above-average returns in 2022. European equities should regain lost ground relative to their US peers. One of the critical calls will be whether value stocks can start to reverse their underperformance of recent years. The wide valuation gap between value and growth stocks and the prospect of higher interest rates suggests a hike is ahead.

• While uncompromising inflation should lead the US Federal Reserve to raise its key rates several times from mid-2022, we are only expecting a short cycle of key rate hikes. The upside potential for longer-term US Treasury bond yields should be limited by the capping of inflation expectations and the size of the Fed’s balance sheet keeping real yields low.

A SUSTAINABLE RECOVERY

We believe that green economic transformation can offer significant opportunities for investors.

The current crisis reminds us that as investors we must align our investments with achieving long-term sustainable growth. Investing for the long term will be crucial, as the typical 3-5 year investment cycle does not match the lifespan of financing the switch to green hydrogen or the innovation required to achieve electric mobility, restore power. natural capital and build green infrastructure.

LONG-TERM INVESTMENT THEMES

Our investment themes for 2022 have both a sustainability angle – energy transition and environmental sustainability – and a focus on long-term trends, including healthcare innovation and disruption via new technologies.

Our regional spotlight is focused on China, the world’s fastest growing large economy, home to many innovative companies and a market that increasingly warrants autonomous allocation within multi-asset portfolios.

Download the full PDF of BNP Paribas Asset Management’s 2022 Investment Outlook


All opinions expressed herein are those of the author as of the date of publication, are based on available information, and are subject to change without notice. Individual portfolio management teams may have different opinions and make different investment decisions for different clients. This document does not constitute investment advice.

The value of investments and the income from them may go down as well as up and investors may not get their original stake back. Past performance is no guarantee of future returns.

Investing in emerging markets, or in specialized or small sectors is likely to be subject to above average volatility due to a high degree of concentration, greater uncertainty as less information is available. available, there is less liquidity or due to greater sensitivity to changes in market conditions (social, political and economic conditions).

Some emerging markets offer less security than the majority of international developed markets. For this reason, portfolio transaction, liquidation and custody services on behalf of funds invested in emerging markets may involve greater risk.



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