Our House Views

The global economy is at the “mid-cycle” stage, with growth expected to continue at a more moderate pace. Persistent inflation concerns, high raw materials prices and supply chain disruptions are challenges. Our global GDP forecast for 2022 is 4.0%, compared to 5.7% in 2021.

Our base expectation is that central banks will keep interest rates low – although with inflation currently on the higher side, there’s increased pressure to raise them. While we expect inflation to subside in 2022, it could contribute to bouts of volatility, especially if combined with new waves and variants of Covid-19, as well as some imminent, geopolitically significant elections.

We therefore advocate a diversified, risk-managed portfolio focused on high-quality, large cap companies with generous dividend yields. The inclusion of high-quality bonds and ESG metrics can also enhance resilience.

Over the next 3-6 months, we’re Overweight on US, European and Asian equities, but Neutral on UK equities due to supply chain issues and upgraded inflation forecasts

Asia’s future is being reshaped by a new generation of tech and consumer leaders, coupled with structural factors that support growth. We like a broad range of sectors in the region, including consumer discretionary, technology, communications and financials. Asia’s savvy middle-income consumers also lagged in spending compared to those in the US and Europe, suggesting room for a resurgence in consumption in 2022.

We also see investments being tied to government actions. China’s 14th Five-Year Plan sets a blueprint for high quality, sustainable growth, heralding opportunities in multiple sectors from renewable energy to electric vehicles, as well as innovative technology. Taiwan and Singapore are also home to high-quality companies that benefit from government support, in areas like smart manufacturing, semiconductor chips, 5G, health technology and more. Indonesia’s raw materials industry also stands to benefit from the growing green industry – for example, through nickel for electric car batteries.

Over the next 3-6 months, we like these sectors within Asia:

• Consumer discretionary – a key driver of the recovery
• Communications – as businesses continue to digitise
• Technology – as the “new normal” generates further demand
• Financials – as the industry continues to benefit from an improved economic outlook

The UN Climate Change Summit (COP26) tackled vital issues from deforestation to the phasing out of fossil fuels, while securing updated pledges from governments. Progress was also made on mitigation and adaptation strategies, sustainability disclosure standards and financing for developing countries. Although more is needed to put us on the path to 1.5°C, COP26 has turned environmental, social and governance factors into top priorities for governments, companies and investors.

The path to net zero relies on green innovation to generate long-term capital growth. Sectors like power generation, infrastructure, transport, construction, electric vehicles and industrials are likely to transform radically as decarbonisation accelerates.

Incorporating ESG metrics into your strategy can help to manage downside risks. Companies with robust ESG practices also tend to be more transparent, and maintain shareholder value more effectively.

Focus on investment themes around clean energy, sustainable infrastructure, electrical transportation, buildings efficiency and emissions reduction for industrials.

The pandemic has unlocked and reinforced the structural adoption of tech globally, creating investment opportunities in both developed and emerging economies.

Technology continues to be a structural winner as the world adjusts to a more convenient, digitally-empowered way of living that enables society to move forward even in uncertain times. Meanwhile, a flood of innovation in sectors like healthcare, online education, communications, e-commerce, entertainment and cybersecurity has opened up more possibilities for humanity.

Explore opportunities that will foster digital transformation in the long run, such as cloud technology, automation, 5G, healthcare and smart mobility.