Macro Insights: 2022 Market Outlook

Published on January, 17th 2022Market and research
Flageollet

Stéphanie BIGOU

Portfolio Manager

2022 Market Outlook: high volatility AND strong fundamentals = investment opportunities

Stéphanie Bigou, Global Macro Portfolio Manager at Seeyond, provides the team’s Market Analysis and Outlook for 2022.

Written on 7th January 2022

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Risks



Economic overheating / tightening monetary policies


Macro China / global contagion


US taxation / sectors regulation


Political risk
(Europe, US)


Health risk / new variants in low vaccinated emerging countries


Geopolitical risk (Russia, China) 

Risks

2022 CENTRAL SCENARIO


Robust world growth

The economic activity will continue to improve over the short and medium term, driven by the combination of two new cycles:

  • a classic cycle driven by savings and the gradual return to a certain normality in the post-pandemic activity of economic agents
  • a long cycle driven by massive investment plans (digitalization of economies and development of the "green" economy).Un reflux de l’inflation

Decrease in inflationary pressures

Supply-driven inflation (70% of current inflation) is expected to decrease (reopening of economies, reduction of bottlenecks). Demand-driven inflation will increase gradually and in proportions more in line with historical averages.

U.S. inflation should go back to between 3 and 3.5% by 2022.

Favorable monetary and financial conditions

Despite entering a monetary tightening cycle, monetary and financial conditions will remain accommodative, particularly in developed countries (≠ 2018).

Structurally higher volatility

Uncertainties (notably about the extent of monetary tightening) and high sector concentration should generate violent but temporary episodes of volatility.

Market Impact

impact



Euro area equities


Financials


Japanese equities


CAD & AUD


US equities


European peripherals


Japanese rates


EM equities


US rates


German rates


 

To go further, please find the detailled market analysis and outlook for 2022 here.

Key points for markets

What is the outlook for equity performance relative to rates in 2022?
Equities should outperform interest rates in 2022.

Do equities still have potential in 2022?
Yes, because monetary and financial conditions will remain favorable.

Will long-term interest rates rise in 2022?
Yes, but a sharp and sustainable increase is expected in 2023.

Will volatility increase in 2022?
Yes, in all major markets.

Will reflation trades outperform in 2022?
Yes, but not all of them.

Will reflation trades be volatile in 2022?
Yes.

Will the US dollar depreciate in 2022?
Yes, but mainly against currencies where there will be a significant monetary policy gap.

What are the two major risks for 2022?
The risk of economic overheating in the developed countries and the risk of the Chinese real estate bubble bursting uncontrollably. We do not believe in the risk of stagflation.

This article has been provided for information purposes only to professional clients as defined in the MiFID Directive. It must not be used for retail investors. The provision of this material or reference to specific sectors or markets in his article does not constitute investment advice or a recommendation or an offer to buy or sell any security. Investors should consider the investment objectives, risks, and expenses of any investment carefully before investing. Views expressed in this article as of the date indicated are subject to change and there can be no assurance that developments will transpire as may be forecasted in this article.