A Year of Discovery

Year Ahead 2022

Foreword

Welcome to the Year Ahead 2022.

After two years marked by disruption, loss, lockdown, and reopening, we’re on the cusp of a Year of Discovery.

We expect a year of two halves. Elevated growth and inflation in the first half will create opportunities in cyclical markets, including the Eurozone. But with lower growth and inflation to come in the second half, we also see healthcare, a relatively defensive sector, as well-positioned. Meanwhile, continued low rates, yields, and spreads mean investors will need to think differently to find yield.

Looking further ahead, the net-zero carbon transition and surging technological disruption are proving to be the biggest investment trends of the decade. This brings opportunity in greentech and sustainable solutions, and in enabling technologies like AI, big data, and cybersecurity.

We hope that this Year Ahead 2022 brings you the context, perspective, and ideas you need to navigate our changing world. We look forward to helping you move ahead with confidence.

Our outlook

Explore the Year Ahead 2022

2022 will be a Year of Discovery

Summary

Financial markets face a Year of Discovery, as we find out what “normal” rates of growth and inflation look like as well as how economic policy responds, after two years dominated by the effects of the pandemic. The year ahead presents an opportunity to align your portfolio with the key trends impacting our world, and with what matters most to you.

Key questions

Summary

With economic growth well above trend and inflation running at its highest level in a decade we identify and give our views on three key questions for the year ahead:

Is inflation here to stay? We expect inflation to subside over the course of next year, as supply/demand mismatches will resolve, energy prices are likely to stabilize, and easing labor market frictions should reduce wage pressure.

What will drive growth in 2022? We expect 2022 to be a year of two halves, with global growth well above trend in the first half, powered by continued ‘re-opening’ dynamics. But the second half will see normalization, as reopening completes, excess savings are mostly spent, and emergency stimulus measures are withdrawn.

What will economic policymakers do? Central banks are likely to scale back monetary accommodation in 2022, but we also expect them to be cautious of overtightening.

Investment ideas for the Year Ahead

Summary

Elevated growth and inflation in the first half will create opportunities in cyclical markets, including the Eurozone. But with lower growth and inflation to come the second half, we also see defensive sectors such as healthcare as well-positioned. Meanwhile, continued low rates, yields, and spreads mean investors will need to think differently to find yield.

The Decade Ahead

Summary

The pandemic advanced many of the key trends we previously identified as defining our Decade Ahead. Technological disruption and localization have accelerated. The pandemic has demonstrated the capacity of central banks to facilitate large fiscal spending packages, and we think monetary and fiscal responses to future crises will become increasingly coordinated.

Political calls for wealth redistribution and environmental action have grown. The economic effects of the net-zero carbon transition began to manifest in 2021 in the form of significant increases in commodity prices and volatility. Even demographic trends have been affected as the pandemic encouraged higher rates of retirement potentially weighing on longer-term economic potential if workers do not return to the labor force.

Technological disruption is set to continue

IoT connections, 2020 – 2026, in billions

Investment ideas for the Decade Ahead

Summary

Invest in disruptive technologies: Technological disruption offers significant opportunity in the decade ahead, and we focus on three major technologies enabling it: artificial intelligence, big data, and cybersecurity. Tapping into these trends requires looking beyond the mega-cap tech names and into small- and mid-cap names in public markets. Private equity also offers a mean of accessing such growth opportunities.

Position for the net-zero carbon transition: Fifty-nine countries, responsible for 55% of global emissions, have pledged to reach net-zero carbon by 2050. At the same time, energy consumption is rising. This offers opportunity in greentech, clean air and carbon reduction, and carbon trading strategies. We also think combining sustainable solutions and traditional commodities is a realistic, diversified, way to navigate the trend toward net-zero.

2021 in review

Summary

2021 saw the interplay of vaccine rollouts and economic reopening with fears of COVID-19 variants and renewed restrictions. Overall growth and inflation were high. In this environment, stocks and commodities rallied, while bonds sold off. We got right that vaccines would facilitate a sustainable recovery, stocks would continue to move higher, and oil prices would increase substantially.

Ready to start a conversation?