As the year draws to a close, we look at what a range of wealth managers have to say about what they think is in store for 2022. Here's a selection.

Value Partners
The firm expects that 2022 will continue to be a volatile year for equities. The US and Europe are likely to struggle with persistently increasing inflation, while growth may start to moderate in the second quarter as the economies enter late-cycle expansion. Our team anticipates a more hawkish tone from central banks in the first half, as their playbook will change from transitory inflation to curbing inflation.

Although it is expected that demand will shift from goods to services and the supply bottlenecks will start to ease, inflation may be more structural in wage growth, food prices, energy costs, and housing prices. That said, tighter monetary policies may be offset by a record amount of fiscal stimulus, such as the infrastructure bill in the US. Amid slower growth globally and inflationary pressures, we will be favouring high-quality growth companies with strong cash flows and pricing power.

In Asia, although corporate earnings growth will further normalise at a gradual pace, we expect fewer bumps along the road in 2022. The Asia ex-Japan regional earnings is expected to grow at 10.9 per cent amid growth moderation.

HSBC Asset Management
The prevailing combination of booming goods demand and hamstrung supply chains is set to continue as we head into 2022. Demand/supply imbalances, reinforced by gradual policy normalisation, will weigh on GDP. For the main economies, our scenario is that growth will be in a 4 to 5 per cent range, with the UK and China towards the top, and the US and Europe towards the bottom. That implies we should expect high single-digit profits growth, even with rising costs pressurising margins.

The requirement to be realistic about growth is most obvious in China. We expect a range of targeted easing measures to be introduced, but the strategy of common prosperity means that investors need to accept that underlying growth in China is in the region of 5 per cent for now. 

“Asia has been [the] beneficiary of the fast global recovery, although parts of Asia still lag badly. Gradual policy normalisation, when it comes, could have a large impact. Tighter financial conditions expose hidden stresses in the system. Many Asian economies are in a much better place to withstand tightening global financial conditions, but there are lingering concerns of Asia spill overs, linked to fiscal deficits and foreign currency debt levels. One relative bright spot could be ASEAN, which has lagged badly, but should see a catch-up phase as economic reopening progresses,” Joseph Little, chief global strategist, HSBC Asset Management said.

Deutsche Bank
Our fears on the inflation front have been realized, and then some [more]. While there is still good reason to expect an easing over the years just ahead from current lofty inflation rates, troubling signs of a more persistent problem continue to grow. At the same time, the war against COVID has progressed less effectively than we had expected or hoped in March in the wake of the remarkable initial progress in developing and disseminating vaccines. The setbacks reflect both the emergence of new and more infectious strains of the virus and disappointing performance in the take-up and distribution of the vaccines. 

On balance, these developments have taken some steam out of recent growth performance and near-term prospects, while adding more persistence to inflation risks. The latter effect has been more worrisome for G10 central banks and caused them to shift in a more hawkish direction recently, raising the risk of a quicker end to the current expansion than we have been envisioning. 

North America and most of the advanced European economies are expected to post better than 5 per cent growth this year. COVID-related slowdowns last quarter in the US and over the European winter are likely to be followed as before with periods of strong growth next year. For 2022 as a whole, we see the US and eurozone economies growing at rates of about 3.75 per cent in quarter-on-quarter terms – well above trend in both cases. Robust consumer spending will be driven by household balance sheets that have strengthened on the back of run-ups in saving and asset values as well as the recovery spending on services as COVID-related drags diminish.

François Savary, chief investment officer, Prime Partners, in Switzerland
We remain convinced that the economic expansion will be confirmed next year and that welcome news, ensuring continuity at the Fed at a “crucial” moment for the US economy, with the implementation of a more restrictive monetary policy on the cards for the next two to three years.

This was before COVID-19 was considered, the virus once again causing panic on the markets at the end of the month, this time due to the Omicron variant.

We did not change our investment policy in the weeks leading up to the appearance of the Omicron variant. Our commitment to favour equities at the expense of bonds, which we have reinforced in recent months, remained unchanged. Recent developments have not led us to change course. In light of the “abrupt” reactions of the markets, which seem more the result of “panic” than facts on the ground, this approach seems to us the most appropriate, even if the performance of our allocations was affected.

Again, the evidence we have on the virulence of the Omicron variant and its associated risks does not justify any rash decision to reduce the overall risk of portfolios. 

With the economic expansion set to continue and inflationary pressures insufficiently contained in the short term, the fundamental environment for bonds remains negative. Against this backdrop, 10-year US treasury yields could reach 2.25 per cent to 2.50 per cent in 2022. A policy of underweighting government debt and short duration bonds therefore remains the best course.

Even though their return potential is now more limited, we believe that corporate debt – especially high yield corporate debt – should be favoured in bond holdings, especially for less aggressive investors.

Equities offer potential in line with expected earnings growth for 2022, which is around 8 per cent to 9 per cent for developed markets. Due to their cheaper valuations, together with the more advanced economic cycle and higher interest rate risk in the US.