UBS report for 2022 pointed out that 2022 will be a year of two halves, with high rates of economic growth and inflation in the first half, then lower growth and inflation in the second.
In the decade ahead, investors should seek opportunities around the transition to net zero carbon and the ABC of disruptive technologies – artificial intelligence, big data and cyber security.
Central banks are likely to reduce their emergency monetary accommodation as the economic effects of the pandemic subside. However, tighter policy is not expected to prevent positive equity market returns, according to the report.
The report’s core recommendations for the year ahead include:
• Buy the winners of global growth Economic growth is likely to remain above trend for the first half of 2022, benefiting cyclicals including eurozone and Japanese equities, US mid-caps, global financials, commodities and energy stocks.
• Seek opportunities in healthcare Although growth is set to be strong in early 2022, favouring cyclical sectors, a slowdown over the year should start to favour more defensive parts of the market, such as healthcare.
• Seek unconventional yield as interest rates, bond yields and credit spreads remain low by historical standards. US senior loans, synthetic credit, private credit and dividend-paying stocks look attractive.
• Position for a stronger US dollar as a combination of Fed tapering and slowing global growth favour the dollar, relative to currencies bound to looser monetary policies, such as the euro, yen and Swiss franc.
Within the bond markets, Asia offers attractive yields and, heading into 2022, UBS maintains its preference for sustainable investments for private clients investing globally.
As pandemic-related drivers of economic growth begin to subside, we embark on a journey of discovery to see whether we are entering a new longer-term economic regime. The ‘winners from global growth’ shall include eurozone equities, and on the US dollar.
Over the longer-term, we see opportunities in disruptive technologies, the net-zero