Investors can maintain a broad and optimistic outlook for 2022, but ANZ is unlikely to get an additional double-digit equity return, as seen in 2021 in its market outlook report. Is warned.
“Rather, 2022 puts assets at risk, based on the belief that equities should continue to outpace bonds and cash against the backdrop of cautious optimism and moderate volatility, despite higher volatility. It starts with a mild overweight to expose, “said Lakshman Ananta Krishnan, Head of Investment Strategy, ANZ. Said..
According to the MSCI World Index, during a year of uncertainty and blockade, the global stock market surged 20.7% in 2021 and rose 14% the previous year.
“These profits were supported by incredibly strong earnings growth and the continuation of unconventional monetary and fiscal measures normally reserved for wartime,” said Ananta Krishnan.
Despite the overall optimistic outlook for 2022, stock markets around the world have been declining since the beginning of the year.
Shane Oliver, Head of Investment Strategy at AMP Capital, said regular market adjustments of up to 20 percent are “healthy and normal.”
“A stock market recession can be painful, but it’s healthy because it helps limit complacency and excessive risk taking,” Oliver said. Said..
He also recommended that investors “turn off the turmoil” in negative news reports that often report on stock market crashes.
“But such headlines are often just a distortion. Billions aren’t informed that the market is recovering and a long-term upward trend in stock prices is added to the stock market,” Oliver said. Says.
The All Ordinaries Index on the Australian Stock Exchange fell on January 25 following the release of inflation data, showing a 2.6% rise in core inflation.
Inflationary pressures around the world have hampered sustained extreme expansion monetary policy and indicate that many central banks around the world are raising public interest rates.
The Bank of England and the Reserve Bank of New Zealand have already started raising rates, and the Federal Reserve Bank of the United States has indicated plans to start raising rates in March.
“Inflationary pressure, or more precisely the central bank’s reaction function, will probably have the most impact on asset prices this year,” said Ananta Krishnan.
In Australia, the removal of border restrictions, high immunization rates, high levels of household savings and stagnant demand are expected to support high economic growth.
Against this background, both ANZ and Commonwealth Bank expect the national economy to grow 5.1%. This is the most substantial annual growth rate since the late 1980s. Westpac Bank forecasts stronger annual growth of 5.5%.
ANZ believes that current risks push the economy into a faster interest rate cycle. Upward risks include actual spending that is already stronger than expected, early tightening of the labor market, or faster than expected acceleration of wage increases.
Downside risk revolves around the COVID-19 pandemic, with more variants, outbreaks, and blockades.
Domestically, inflation lags behind other major economies, and the Reserve Bank of Australia (RBA) is patiently working to raise cash rates.
However, the latest inflation rates are well above RBA’s expectations, and economists expect RBA to change forward guidance soon.
The RBA Board will hold its first financial conference of the year on February 1.