One of the world’s largest wealth managers, UBS, has published its outlook for the coming year. In addition, the financial house made it clear where investors would find the best investment options based on the next decade.
• Economic growth will slow in second half
• Decade of transformation ahead In its investment outlook “Year Ahead 2022: A Year of Discovery”, the Chief Investment Office of UBS Global Wealth Management took a close look at both possible developments in the coming stock market year and investment opportunities for investors over the next decade.
2022 divided into two with “new normality”
The asset manager expects a two-part year in 2022. Economic growth “above trend” is to be expected in the first half of the year, from which cyclicals from the euro zone and Japan in particular should benefit. In addition, the experts expect that medium-sized US companies, international financial stocks and commodity and energy stocks will also benefit from the expected strong economic growth. According to UBS, this will change in the second half of the year when both the high growth and inflation rates will weaken. In the course of the year, “defensive market segments such as healthcare” should therefore be increasingly favored, the experts continue. UBS Global Wealth Management also rates “unconventional sources of return” as attractive in the coming year. Interest rates, bond yields and credit spreads are still low by historical standards. “US senior loans, synthetic credit, private credit and high-yield stocks all look attractive.” In addition, investors should position themselves for a stronger
US dollar, as monetary policy throttling by the US Federal Reserve is to be expected, while the currency watchdogs in Europe, Switzerland and Japan, for example, are likely to stick to their loose monetary policy. Mark Haefele, Chief Investment Officer at UBS Global Wealth Management, spoke in the investment outlook of a “reconnaissance trip to find out whether we are at the starting point of a new longer-term economic order”. So while he tends to bet on growth winners in the first half of the year, longer term “opportunities can be found around disruptive technologies, the transition to a zero-carbon economy and the potential of alternative investments to unlock returns and control volatility.”
Opportunities for the next decade
While the next stock market year is expected to be divided into two, UBS expects massive adjustments over the next decade and speaks of a “decade of transformation”. Investors are faced with a world that will be characterized by increasing technological disruption, an aging population, monetary and fiscal policy coordination and the decline in globalization as well as increased political demands for a redistribution of wealth and environmental protection measures, according to the Swiss investment outlook. These developments were accelerated by the pandemic. The asset manager sees opportunities for investors in this environment thanks to convincing long-term investment opportunities. Specifically, the experts name sectors such as “artificial intelligence, big data and cyber security” in this context, which the financial house believes combined sales will almost double to 620 billion US dollars by 2025. It goes on to say that anyone who wants to benefit in this area should look around in the tech segment away from mega caps. The “next big thing” is to be expected more in the mid-cap area. In addition, UBS advises investors to use private equity in order to be invested in future growth companies at an early stage.
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