7 January 2022
Our economic road map for 2022 suggests that the first six months of the year could be problematic, particularly when compared with 2021: Price pressures look as though they might ease, but inflation could remain uncomfortably high for the first few months of the year. This is a continuation of the stagflationary narrative that persisted in the second half of last year, and the emergence of the Omicron variant could tip us further in that direction.
Prospects for the second half of 2022 look better, as inventory rebuilds, and the unwinding of supply chain disruptions could fuel a more sustainable recovery. An improved growth picture and slower inflation should bring us back to a Goldilocks regime, which should be far better for market returns and general risk assets.
It isn’t particularly fashionable or click-worthy to admit that we have less confidence in our base-case projection than normal, but we believe it’s important to acknowledge the highly uncertain environment that we’re in as we head into a year dominated by a very long list of known unknowns.
To learn more about the macroeconomic themes for North America, Europe, Asia-Pacific and Latin America, download the full edition.
Greater China Equities: Opportunities abound for stock pickers
We believe that amid unprecedented change, such as the pandemic accelerating China’s reform process, investors can capture potential opportunities in onshore (A-shares), and offshore (Hong Kong and Taiwan equity) markets by employing a bottom-up, stock-picking approach, as current valuations present compelling opportunities.
AP-REITs: Resilience amid strong fundamentals
Although uncertainty exists, the fundamentals of Asia Pacific REITS remain strong, and it is poised for continued rebound in 2022.
Sustainable Asia Bonds: Emerging opportunity
The trading environment within Asia’s fixed-income space in 2021 has been challenging—sustainable Asia bonds included. However, we believe there are good reasons to be excited about the year ahead.
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