Macquarie Asset Management has outlined its expectations for strong global growth in the year ahead with compelling opportunities in equity markets despite a number of headwinds.
During a period of significant unpredictability, the firm remains “stubbornly optimistic” in its outlook according to Macquarie Asset Management group head Ben Way.
“For 2022, we believe it will be a year where global growth is again strong, although there is likely to be some softness early in the year due to the Omicron variant,” he said.
“Inflation should peak around mid-year, but in our view, is likely to remain above central bank targets all year, keeping inflation concerns front and centre for investors and policymakers alike.
“It will also be a year of synchronised tightening of monetary policy and further rapid progress on the energy transition.”
The firm flagged a number of potential headwinds for global equities including stretched valuations in parts of the market, inflation, supply chain pressures and slowing growth in markets like China which it believes will continue to drive uncertainty.
“Despite all the challenges facing the political and economic systems globally, we continue to believe that there are few, if any, assets that look as compelling as equities right now,” said head of global equities John Leonard.
“We think in current conditions, equities offer a decent combination of transparency, liquidity and growth potential.”
As part of its outlook, Macquarie Asset Management also put forward its view that the world economy had been in one “macroeconomic regime” since the fall of the Berlin Wall in 1989.
“The globalisation process this unleashed, and specifically the successive positive labour supply shocks combined with a monetary policy framework focused on inflation targeting, has resulted in steady downward pressure on interest rates, both short- and long-term,” said senior economist Daniel McCormack.
“This, in turn, has fuelled rapid growth in debt, asset values and the financial sector.”
However, the firm suggested that future historians may end up identifying COVID-19 as the point at which this macroeconomic regime changed.
“While it is too early to try to predict the long-run outcomes of the next regime, we do believe it will include a slowing down of globalisation, tough policy choices, wage growth, big government and elevated geopolitical tensions,” Mr Way said.
Jon Bragg
Jon Bragg is a journalist for Momentum Media's Investor Daily, nestegg and ifa. He enjoys writing about a wide variety of financial topics and issues and exploring the many implications they have on all aspects of life.
