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In response to the coronavirus, the Fed created trillions of dollars out of thin air, Congress doled out trillions more, and the pandemic provided a tacit guarantee that interest rates would not rise. If Omicron means a return to normal order, investors will face the highest inflation in a generation, record fiscal debt and a Fed with no reason not to forcefully tackle inflation. . At the same time, stocks and bonds are very expensive, which limits prudent investment options.
“There’s no place to hide” Melda Mergen, global head of equities at Columbia Threadneedle Investments, said during a presentation of the company’s 2022 outlook. “Most markets are at the top of the bar at their current valuations.”
She remains bullish on equities but emphasizes cheaper pockets, such as smaller companies and value stocks. She noted, however, that the valuation gap between growth and value stocks has narrowed, so picks are thinner.
Other investment advisers also recommend looking for cheaper market segments, but they differ on where to find them. Mr Sri-Kumar likes European stocks more than US stocks, and he would buy emerging markets, such as India, which are not dependent on strong growth in China, where he foresees increasing risk in 2022.
Ian Mortimer, co-manager of the Guinness Atkinson Global Innovators fund, suggests holding “quality defensive” stocks, stocks in sectors that show rising dividends. Some examples are British American Tobacco, Imperial Marks, which also sells tobacco, and the insurance company Aflac.
For Mr. Hyman, “the view of equities is much better than that of bonds”. He said the financials, energy and materials sectors tend to do well when interest rates rise.
If stocks do better than bonds in 2022, it will mean the same for fund owners. The average bond fund was flat in the fourth quarter and up 1% for all of 2021. The most notable niches, each returning around 5% on the year, held bank loans and high-yield bonds.
