Eva Lee, UBS
The global economic growth rate and inflation is likely to be high in the first half of next year, followed by lower growth and inflation in the second half, UBS Global Wealth Management’s Chief Investment Office forecasts in its 2022 outlook.
Cyclical stocks should therefore post the highest earnings growth rates in the first half of the year, said Eva Lee, managing director, head of greater China equities at UBS GWM.
The “winners from global growth”, include Eurozone and Japanese equities, US midcaps, global financials, and commodities and energy stocks.
“We particularly like companies exposed to business and government spending, as well as consumer spending on services,” she said.
In the second half of the year, UBS GWM prefers exposure to the healthcare sector which has performed less well in 2021.
Lee said among the sub-sectors within the healthcare sector, which include pharmaceutical companies, contract research organisations, and biotech companies, she sees potential in the latter as they are the only ones yet to record a profit.
China growth, on the other hand, is expected to be a different story, with gradual growth in the first half of the year followed by a stronger growth rate for the rest of the year.
UBS GWM believes with headwinds starting to abate, the worst may be over for China equities. In the long term, it sees opportunities in new economy sectors, such as consumer durables, green tech and renewable energy, which are also well supported by the government.
Fixed income woes
The firm is relatively pessimistic on fixed income, over worries that rates may increase quicker than the market have expected.
Yet, interest rates and bond yields remain low by historical standard, so UBS GWM recommends seeking “unconventional yield in US senior loans, synthetic credit and private credits”.
Asia high yield market will continue to offer attractive yields, but Lee noted that there may still be volatility in the market as there is a significant portion of Chinese property bond maturities in the first half of next year.
Future trends
In the decade ahead, the Swiss bank believes opportunities will line in the “ABC technologies”, artificial intelligence, big data, and cybersecurity. These sectors are expected to grow to $620bn in 2025 from $384bn last year.
The net-zero carbon transition also creates opportunities in sustainable investing, such as green tech, clean air and carbon reduction solutions, and carbon trading strategies.
