Looking at our economic outlook for 2022, global growth should remain above trend, while Australian growth should undergo a significant re-acceleration to an above-trend pace. US Inflation will likely prove stubborn in the next few months but ease through the year.
Equities: We remain overweight both global and Australian equities into 2022. At the margin, we favour value stocks and non-US equities.
Fixed income: we maintain an underweight to fixed interest. The US 10-year Treasury yield should rise to around 2%-by late 2022, but the selloff should be capped by evidence that inflationary pressures are easing. Corporate debt should outperform high-quality government bonds in 2022. We favour high yield over investment grade.
Alternatives: We continue to be overweight alternative assets. In part, this is due to our concerns around the potential for a capital loss in traditional fixed interest products as yields likely rise in 2022 as the economic recovery broadens. We see good risk-adjusted return opportunities in growth alternatives such as private equity and real assets such as infrastructure and property. At the same time, we favour private credit within our “defensive alts” component. Sharing our view and positioning for the year ahead we address:
- An exceptional 2021 but still scope for 2022 gains
- Another “recovery year” for the global economy
- China should do better in 2022 as policy is eased
- COVID recovery for Australia in 2022
- Key asset class views for 2022
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Written by
David Cassidy, Head of Investment Strategy
David is one of Australia’s leading investment strategists.