Credit Suisse Investment Outlook 2022: Economic Growth to Stay Above Trend
26th November 2021 | Hong Kong
Credit Suisse has released the Investment Outlook for 2022, with economic growth in 2022 to stay above trend. According to the Credit Suisse Investment Outlook 2022, the global economy is expected to grow by 4.3%. Although several central banks have started to withdraw pandemic stimulus, interest rates are set to remain at or near zero in the major developed economies. Against this backdrop, equity returns should remain attractive, though they are likely to be more moderate than last year. View: Credit Suisse Investment Outlook 2022
“ Credit Suisse Investment Outlook 2022: Economic Growth to Stay Above Trend “
Credit Suisse Investment Outlook 2022
The global economy looks to remain on a solid path in 2022, driven by robust demand, still supportive fiscal and monetary policy and the relaxation of COVID-19 related restrictions. Against this backdrop, we expect equities to deliver attractive single-digit returns for investors, supported by earnings. Beyond the shift to a post-pandemic normal, we believe 2022 will see the start of a great transition to a world in which sustainability plays an ever-increasing role for consumers, businesses, governments and regulators. In this context, we expect environmental, social and governance trends to remain focal and investors to continue including sustainability considerations when allocating capital.
Outlook for the major economies and currencies:
United States. Credit Suisse expects the USA to post real GDP growth of 3.8% in 2022, with a halting services rebound and ongoing supply chain problems complicating the final stages of the pandemic recovery. Inflation is expected to slow to 3.9% after an extreme spike in 2021. We expect the USD to benefit from a rate advantage over other developed market currencies as the Federal Reserve withdraws pandemic stimulus.
Eurozone. The Eurozone is expected to grow by 4.2% in 2022, as the economy eventually overcomes ongoing supply chain issues that have led to a sharp rise in inflation. The European Central Bank (ECB) should start paring back its asset purchase programs in 2022. We expect the EUR to start 2022 rather softly against the USD, but stabilize and recover later in the year, contingent on the ECB’s policy actions.
Switzerland. The Swiss economy should post solid growth in the coming months, while a decline in the unemployment rate should support consumer spending. We forecast Swiss GDP growth of 2.5% in 2022. As the Swiss National Bank is likely to continue to intervene in the FX market if needed, the CHF should not appreciate meaningfully against the EUR.
China. After a strong growth recovery, China’s experienced a renewed slowdown due to problems in its real estate sector and regulatory changes and policy reform, which we expect to continue into 2022, potentially weighing on growth. China’s economy is forecast to grow at 6.1% in 2022. We expect the CNY to hold stable or soften somewhat in the first half of 2022.
Japan. The Japanese economy is expected to grow by 1.7%, as the new government is likely to provide further stimulus to support the economic recovery. We forecast the JPY to depreciate against the USD in 2022.
Outlook for the main asset classes:
Equities are forecast to provide single-digit returns in 2022, more moderate than in 2021, while continuing to offer an attractive risk premium over bonds. Equity segments that lagged the pandemic recovery should emerge as bright spots, as should industries that benefit from secular growth trends.
In fixed income, government bond yields will likely deliver negative returns in 2022. In credit, low spreads in investment grade and high yield will barely compensate for the risks associated with higher yields. We favor Eurozone inflation-linked bonds and prefer senior loans.
Demand for commodities is set to remain supportive in 2022 given expectations for continued above-average global industrial production growth and restocking needs. The price of carbon will stay a key topic, while gold may be vulnerable as policy normalization begins.
In alternative investments, real estate should continue to benefit from the still low interest rate environment, as well as the continuing economic recovery. The economic backdrop also remains supportive for private markets, while hedge funds should deliver modest returns close to the historical average.
Michael Strobaek, Global Chief Investment Officer at Credit Suisse:
“In light of the continuing economic recovery, we expect equities to deliver appealing returns in 2022, warranting sufficient exposure to the asset class in portfolios. Given only meager expected returns in fixed income, investors should look to strategies that follow non-traditional patterns to diversify their opportunity set. Given the accentuating climate crisis, policy is bound to become more climate-focused. This is a development that investors must factor into their investment decisions.”
Nannette Hechler-Fayd’herbe, Chief Investment Officer International Wealth Management and Global Head of Economics & Research at Credit Suisse:
“The COVID-19 pandemic was an unprecedented shock to the global economy that led global policymakers and businesses into uncharted waters. It also heightened the relevance of thematic investments, which can help investors capture long-term trends that are ushering in change. In this context, our Supertrends framework remains highly relevant, as stakeholders commit to net zero.”
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