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Investment Outlook 2022

In our 2022 Investment Outlook, we seek to help investors to navigate the rapids as the global economy stabilises during the next phases of the economic recovery. We also consider the possible broader consequences for macroeconomic policy as the world tackles the social and economic challenges laid bare by the pandemic.

Macroeconomics and markets

Our macroeconomics and markets sections highlight that:

  • While some production constraints will remain well into 2022, they will be resolved eventually, enabling economies to revert to trend growth rates without generating higher inflation.
  • Substantial accumulated household savings mean consumers have the resources to go on a spending spree that could have inflationary consequences. If, however, the after-effects of living through a global pandemic inhibit consumption, central bank and state support may be needed to encourage demand.
  • We expect the momentum behind rising wages to fade as employers adjust processes and invest capital to reduce their dependence on labour. Today’s relative weakness of organised labour means comparisons with the 1970s are inappropriate.
  • Equities will struggle to generate above-average returns in 2022. European equities look set to make up lost ground with their US peers. One of the critical calls will be whether value stocks can begin to reverse their underperformance of the last several years. The wide valuation gap between value and growth stocks and the prospect of higher interest rates suggest upside is ahead.
  • While intransigent inflation is likely to lead the US Federal Reserve to raise policy rates several times in 2022, we expect only a short cycle of increases in key rates. The upside of longer-term US Treasury bond yields should be limited by capped inflation expectations and the size of the Fed’s balance sheet keeping real yields low.

A sustainable recovery

We devote a significant section of our outlook to the opportunities we believe the green economic transformation can offer investors.

The current crisis is a reminder that we as investors must align investing with the realisation of sustainable long-term growth. Investing for the long run will be crucial, because the typical 3-5 year investment cycle does not match the lifespan of financing the shift to green hydrogen or the innovation required to achieve e-mobility, restore natural capital and build green infrastructure.

Investment themes for the long run

Our investment themes for 2022 have both a sustainable angle – energy transition and environmental sustainability – and a focus on long-running trends including healthcare innovation and disruption via new technology.

Our regional spotlight focuses on China, the world’s fastest growing major economy, home to many innovative companies and a market that increasingly warrants a standalone allocation within multi-asset portfolios.

For more on what’s next for the global economy and the implications for investors, read our full Investment Outlook.


This material is issued and has been prepared by a representative of BNP PARIBAS ASSET MANAGEMENT Australia Limited (“BNPP AMAU”) AFSL 223418 ABN 78 008 576 449. This material is produced for information purposes only and does not constitute:
 
1. an offer to buy nor a solicitation to sell, nor shall it form the basis of or be relied upon in connection with any contract or commitment whatsoever or
2. investment advice.
 
This material makes reference to certain financial instruments authorised and regulated in their jurisdiction(s) of incorporation. No action has been taken which would permit the public offering of the financial instrument(s) in any other jurisdiction, except as indicated in the most recent prospectus and the Key Investor Information Document (KIID) of the relevant financial instrument(s) where such action would be required, in particular, in the United States, to US persons (as such term is defined in Regulation S of the United States Securities Act of 1933). Prior to any subscription in a country in which such financial instrument(s) is/are registered, investors should verify any legal constraints or restrictions there may be in connection with the subscription, purchase, possession or sale of the financial instrument(s). Investors considering subscribing to the financial instrument(s) should read carefully the most recent prospectus and Key Investor Information Document (KIID) and consult the financial instrument(s’) most recent financial reports. These documents are available on the website. Opinions included in this material constitute the judgement of the investment management company at the time specified and may be subject to change without notice. The investment management company is not obliged to update or alter the information or opinions contained within this material. Investors should consult their own legal and tax advisors in respect of legal, accounting, domicile and tax advice prior to investing in the financial instrument(s) in order to make an independent determination of the suitability and consequences of an investment therein, if permitted. Please note that different types of investments, if contained within this material, involve varying degrees of risk and there can be no assurance that any specific investment may either be suitable, appropriate or profitable for an investor’s investment portfolio.
 
Given the economic and market risks, there can be no assurance that the financial instrument(s) will achieve its/their investment objectives. Returns may be affected by, amongst other things, investment strategies or objectives of the financial instrument(s) and material market and economic conditions, including interest rates, market terms and general market conditions. The different strategies applied to financial instruments may have a significant effect on the results presented in this material. Past performance is not a guide to future performance and the value of the investments in financial instrument(s) may go down as well as up. Investors may not get back the amount they originally invested. The performance data, as applicable, reflected in this material, do not take into account the commissions, costs incurred on the issue and redemption and taxes.
 
All information referred to in the present document is available on www.bnpparibas-am.com

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