Investing in the Great Transformation
A Narrative change has started
• Stagflation risk, with features similar to the '70s is rising. We believe that global growth is likely to return to potential after the peak, as cyclical stimuli fade.
• Furthermore, we believe that inflation will prove permanent. For central banks, we expect to see the end of ultra-cheap money and the shift towards tapering to keep credibility intact.
• In our view, 2022 could feature 5 key transitions leading to the great desynchronization.
Amundi's Key Convictions
Amundi's Key Convictions for 2022
• Recent data, reviving demand and supply chain constraints point to the narrative of sticky ‘inflation’ even as we are witnessing a slowing growth momentum marred by uncertainty around the Covid-19 pandemic.
• We believe investors should aim to increase their inflation-adjusted returns by including a diverse set of assets in portfolios at a time when growth momentum is slowing.
1 Beware of Frothy Valuations: In our view, valuations in some corners of the market are high. Thus, investors should be watchful of the direction of real rates, which can affect asset prices, particularly when these assets are trading, in our opinion, above what is justified by fundamentals.
2 Focus on Equities Resilient to Blowing Prices: While recent earnings and forward guidance have been strong, we are vigilant on inflation and the Covid situation. We believe that there are opportunities to be explored in Value, Quality and Dividend stock but selectivity and focusing on the long term earnings outlook of companies will be key.
3 Stay Defensive and Flexible in Fixed Income: We believe that investors should search for income in corporate credit (euro investment grade and high yield, emerging markets bond) through a very selective eye and balancing yield with credit quality and liquidity.
4 Put ESG at the Core of Portfolios: From our perspective, increasing investor preferences, regulation and the global push towards ESG will drive demand and improve data quality. Collectively, this could have an effect on asset prices, and may encourage investors to make ESG a key component of their analysis.
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Global growth should decelerate in early 2022 amid China’s slowdown, followed by a slight pick-up in Q2/Q3 when China stabilises and possible extra fiscal spending is delivered.
The Covid-19 crisis has heightened the need to fight inequality and put health and green issues at the top of the political agenda. Higher taxation and sector discrimination are the consequences of this.
Geopolitical challenges, the battle for energy and tech supremacy, and the need for resilient supply chains will drive trends of re-shoring and near-shoring. Regional vs. global themes to emerge.
Supply bottlenecks, energy prices, wage growth and rising tax rates will push up inflation, which will remain structurally higher than in the previous decade.
CB will keep a financial-repression environment (zero or negative real rates) to improve the affordability of the debt pile needed to finance environmental and social projects.
CB will keep a financial-repression environment (zero or negative real rates) to improve the affordability of the debt pile needed to finance environmental and social projects.
Supply bottlenecks, energy prices, wage growth and rising tax rates will push up inflation, which will remain structurally higher than in the previous decade.
Geopolitical challenges, the battle for energy and tech supremacy, and the need for resilient supply chains will drive trends of re-shoring and near-shoring. Regional vs. global themes to emerge.
The Covid-19 crisis has heightened the need to fight inequality and put health and green issues at the top of the political agenda. Higher taxation and sector discrimination are the consequences of this.
Global growth should decelerate in early 2022 amid China’s slowdown, followed by a slight pick-up in Q2/Q3 when China stabilises and possible extra fiscal spending is delivered.
From Post-Pandemic Eurphoria to Slowing Momentum
From Liberalism to Government Intervention
From Global Value Chains to Self-Independence
From Temporary to Sticky Inflation
From Old to New Central Bank Mandates