What To Expect While Investing In 2022
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At the start of the year, many investors will be looking forward to what they should keep an eye on for 2022. However, considering the global turmoil of the past two years, it would be best to hear from the experts on what to expect in the coming months.
Here are the top picks from the experts at Principal Asset Management on what to look out for in the investment landscape for 2022.
Economic recovery is on the horizon
While the Omicron variant of COVID-19 has thrown some reopening plans into question, there is still hope for global growth to continue. Thus far, countries have shown to be willing to open borders once again. This will pave the way for international trade to normalise and supply chains restored.
According to Patrick Chang, Chief Investment Officer, Equities, ASEAN at Principal Asset Management, it’s best to keep a long-term focus while staying invested.
“Our view on Omicron is that it is too early to judge its impact on the economy and if history is to repeat itself like in May 2020, this could be an opportunity for investors. In short – stay invested!” he advised and outlined other key factors that will impact the economy in the coming year.
Most of this predicted growth will take place in the first half of 2022, largely driven by the rundown of excess savings and business restocking.
However, don’t expect the elevated growth levels to continue for the entire year; rates are expected to normalise in the second half of 2022. By then, accumulated savings will be mostly exhausted, quantitative easing reduced and economic reopening largely completed.
During this time, inflation will also begin to moderate – or reverse – as supply chain pressure will have eased. Supply-demand mismatches will have resolved towards the end of 2022 as demand shifts back from manufactured goods towards services.
Tapering to begin in the US
Quantitative easing (where the government buys long term securities to lower the interest rate) is expected to begin slowing towards the end of 2022 (a situation generally known as tapering). The slowing of acquisitions is likely to slow down the US growth around this time.
The US Federal Reserve (or the Fed) has been on a path of quantitative easing to prop up the economy since June 2020. The current instance of quantitative easing is unlike those implemented before it, since the Fed did not announce a limit on the amount of spending.
While this has helped the US economy survive the pandemic recession, it is expected to begin tapering off soon.
“On the monetary policy front, we previously expected the Fed to begin raising rates in late 2022. Now, with the Fed likely to announce an accelerated pace of tapering in December or January, our base case is for the policy rate to lift-off in Q2 2022,” said Chang.
Positive outlook for ASEAN and China
Asia is gradually reopening economies, allowing supply chains to resume and manufacturing capabilities to come back online. Principal believes that the region will continue to be a leader in economic growth by early 2022.
China itself recently announced a second reserve ratio (RRR) cut this year, releasing about US$188 billion of liquidity to support economic activities. The recent upheavals brought on by Chinese regulatory changes (particularly in the technology sector) are also expected to have peaked and will likely not affect investments in the coming year.
Principal’s focus for ASEAN and China in 2022 will be on companies with structural growth drivers such as green policies, ecommerce, cloud computing, internet of things.
Investors shift towards impact investment
There is growing support for sustainable business practices and efforts to combat climate change. The advent of Environmental, Social, and Governance (ESG) Criteria for investors has made it more important for companies to be aware of how their plans impact the environment.
More investors are expected to shift their attention towards impact investments, where their money can best be used to address challenges facing humans. As such, Principal foresees that the next wave of growth will be driven by investors actively identifying and seeking out sustainability challenges in areas ranging from climate to inequality.
Principal’s forecast continues to favor sustainable investing supported by Carbon neutral pledges, the US rejoining the Paris Agreement, and substantial inflows into ESG funds and ETFs. As such, Healthtech and Greentech should be high on any investor’s watchlist.
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The following is a sample of the unit trust funds available through Principal:
| 1-year | 3-year | 5-year | |
| Principal Lifetime Bond Fund | 0.10% | 14.12% | 25.24% |
| Principal Global Titans Fund - Class MYR | 20.27% | 46.12% | 62.04% |
| Principal Islamic Lifetime Balanced Fund (formerly known as CIMB Islamic Balanced Fund) | 4.06% | 20.63% | 29.42% |
| Principal Asia Pacific Dynamic Income Fund - Class MYR | 8.11% | 39.54% | 61.24% |
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