2022 is likely to experience a rocky start due to a long list of macro headwinds, said Manulife Investment Management at its recent regional investment conference.
But things are expected to take a turn for the better later in the year.
“Prospects for the second half of 2022 look better as we expect inventory rebuilds and the unwinding of supply chain disruptions to fuel a more sustainable recovery than the ‘pent-up’ rebound of 2021,” said Luke Browne, senior portfolio manager and head of asset allocation, multi-asset solutions team Asia, Manulife Investment Management.
“Improving growth and slower inflation are likely to bring us back to a “Goldilocks regime” which should be far better for market returns and general risk assets.”
To add a defensive tilt during a period of market uncertainty, Manulife favours fixed income in both the emerging market and US high yield space.
“We see opportunities in both emerging market credit and US high yield.
“US high yield will likely continue to be resilient in 2022 based on a solid US macro backdrop with low defaults,” said John Addeo, senior portfolio manager, global chief investment officer, fixed income, and primary portfolio manager of the global multi-asset diversified income strategy said.
“Emerging market credit has a relatively attractive yield compared with US high yield, which represents a compelling opportunity. This is more likely the case in shorter-duration, higher-quality markets in Asia, where credit spreads can be 60 to 100 basis points cheaper relative to US high yield.”
The investment manager also identifies Reits as another asset class which is likely to outperform in 2022.
As Manulife expects the economy to continue to bounce back into 2022, global Reits would enable investors to capitalise on the economic recovery as well as long-term trends such as the continued growth in technology and the aging global population.
“The digitisation of global economies in the 21st Century, combined with the everlasting need for healthcare, should provide enduring demand for selected Reits that are immersed in these trends,” said Joseph Marguy, portfolio manager, global real estate.
The portfolio manager especially favours industrial Reits, which focus on logistics warehousing and data center Reits that would benefit from 5G developments. He believes industrial Reits could pay off in the post-Covid-19 era as both sectors are now perceived as beneficiaries of the ongoing digitalisation of economies.