1H 2022 | Market Intelligence

Market outlook

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Capital Markets Strategy Team

The investment landscape for 2022

When we assess the growth and inflationary environment, we believe the landscape in 2022 will provide a good backdrop for global markets. However, the ride will have many pit stops along the way, impacting sentiment towards risk assets, such as:

  • fear of a policy mistake by global central banks
  • impact of COVID-19 variants on growth (at the time of writing, it’s the Omicron variant)
  • fear of inflation affecting consumption in a material way
  • U.S. mid-term elections
  • geopolitical risk.

If we experience any setbacks along the way, we believe that investors are likely to be rewarded if they maintain an optimistic view of the road ahead.

We'll get to where we're going, but there will be pit stops along the way.

  • Growth is likely past peak but remains resilient

    Global growth and earnings likely peaked during the summer of 2021. Despite headwinds posed by supply chain disruptions and inflation, the backdrop remains positive for global growth and earnings.

  • Inflation—enduring but softer

    Our inflation model suggests CPI will trend lower from current levels of 6.8 percent but will likely remain above three per cent through the third quarter of 2022. Inflation will remain a concern throughout 2022 but receive nowhere near the level of attention it’s receiving today.

  • Equity markets enter the normalization phase of this market cycle

    This next phase of the post-recession recovery can be characterized as a normalization phase, where earnings growth will moderate but remain strong, valuation will decrease in an orderly fashion, and yields across the curve are likely to increase.

  • Remember what role fixed income plays in a portfolio

    In our 2021 outlook, we suggested that fixed-income investors should target shorter-duration bonds and credit, including both high-yield and investment-grade bonds. This proved to be the right areas to target as they outperformed the more traditional long-duration sovereign bonds that performed well during the depths of the recession in 2020. Once again, however, we need to ignore the recent performance and look ahead to determine where the opportunities exist in fixed income.

1H 2022

Market Intelligence: our outlook for the year ahead

Related viewpoints

What’s causing the recent market volatility and selloff?

Recently, there’s been a lot of market volatility and investor selling. We believe it’s a short-term reaction to Russia-Ukraine political tension, uncertainty about U.S. Federal Reserve rate hikes, Q4 earnings and guidance, and other factors.
Read more

The opinions expressed are those of the contributors as of December 31, 2021, and are subject to change. A rise in interest rates typically causes bond prices to fall. The longer the average maturity of the bonds held by a fund, the more sensitive a fund is likely to be to interest‑rate changes. The yield earned by a fund will vary with changes in interest rates.

Currency risk is the risk that fluctuations in exchange rates may adversely affect the value of a fund’s investments.

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