UBS: 2022 is expected to be a ‘divided year’

UBS, the world’s leading asset management company, is forecasting a year of discovery, which will reveal what the new “normality” now looks like, after two years of both lockdowns and reopening phases. 2022 is expected to be a “split year”, with high rates of economic growth and inflation in the first half, followed by lower rates of growth and inflation in the second half. Over the next decade, investors will have to look for opportunities in the transition to a clean, zero-carbon economy, as well as in disruptive technologies – artificial intelligence, big data and cybersecurity.

Central banks are likely to cut emergency monetary easing as the economic impact of the pandemic recedes. However, tighter policies are not expected to deter positive stock market returns, according to the ‘Year Ahead’ 2022 annual report, published by UBS Global Wealth Management’s Chief Investment Office.

The following are the main proposals made in this report for the following year:
– Buy the winners of global growth. Economic growth is likely to remain above trends for the first half of 2022, offering benefits to cyclical securities such as Eurozone and Japanese stocks, US mid-cap securities, global financial securities, commodities and energy stocks. .
– Seek opportunities in the healthcare industry. Although growth is expected to be strong in early 2022, favoring cyclical sectors, the slowdown during the year is likely to begin to favor more conservative market sectors, such as the healthcare sector.
– Look for non-conventional yields, because interest rates, bond yields and credit margins remain low based on historical data. Secured US loans, composite loans, private loans and dividend-paying shares present an attractive picture.
– Make strong US dollar placements as the Fed’s combination of declining asset markets and slowing global growth favors the dollar over currencies affected by the US dollar. looser monetary policies, such as the euro, the yen and the Swiss franc.

In the bond markets, the Asian high-yield bond market offers attractive returns and, as 2022 approaches, UBS maintains its preference for sustainable investment in terms of private clients investing globally.

Mark Haefele, Investment Director at UBS Global Wealth Management, stated: We start the year with a positive attitude towards the “winners of global growth”, which includes the shares of the Eurozone, and against the US dollar. and the power of alternatives, to release performance and manage instability. ”

A decade of transformation

Over the past decade, investors have been confronted with a world experiencing increased technological upheaval, population aging, monetary and fiscal policy coordination, and globalization, along with stronger political calls for wealth redistribution and environmental action.

The pandemic has accelerated the development of many of these issues, creating uncertainty as well as interesting long-term investment opportunities. For example, aggregate revenues from “ABC technologies” (artificial intelligence, big data & cybersecurity), ie artificial intelligence, big data and cybersecurity, are expected to increase from $ 384 billion in 2020 to $ 620 billion in 2025. To capitalize on growth in these areas, investors need to look beyond high-tech stocks and focus on mid-cap names that could well be the “next big opportunity”. “, as well as to use private equity funds, in order to have exposure to companies that are in an early stage of development.

Meanwhile, the transition to a clean zero-carbon economy looks set to become one of the most important investment trends of the next decade. Achieving net zero emissions is projected to require global investment in renewable energy sources of 50 trillion. USD for each decade until 2050, while 50% of emission reductions must come from underdeveloped technologies. This creates opportunities for the commitment of green technology, clean air and carbon emissions solutions, as well as in the area of ​​the carbon trading system.

Scenario based analysis

Asset category targets for June 2022