Investment Insights Q1 2022

The final quarter of 2021 proved to be an eventful one for the global economy, with surging inflation and ongoing concerns about supply shortages. Yet markets performed relatively well over the period despite the new Omicron strain adding to the uncertainty. As we look ahead to 2022, economic indicators suggest the post-COVID recovery should continue, and so too should earnings growth.

6 January 2022

Our lead article looks at the buzzword of the moment — stagflation. As investors’ fears of the potential stagnation of output coupled with rising inflation ebbed and flowed, equity and bond markets experienced some volatiliy. What will this uncertainty mean for the year ahead?

On page 5, we look at the domination of the markets by US-based tech firms, as we ask if all the geeks are American. Where should we look to for the next wave of tech innovation (and investment opportunity) — and is it necessarily going to come from across the pond?

After the initial wave of selling amid the first lockdowns in March 2020, global equity markets have been on a more or less upward path, but leadership has shifted from one style to another. But rather than focus on styles, such as ‘growth’ versus ‘value’, we explain why we think the best approach is to look for companies with quality and durability of earnings growth, whatever style category they might fit into.

On page 8, we explore whether the transition toward a world of net-zero carbon emissions will boost overall economic output or hinder it. There is hope that it could have a net positive effect, but governments and business need to start taking action now to avoid a more disruptive transition.

Lastly, on page 9, we focus on the UK’s large ‘credit card’ bill, as pandemic related borrowing starts to come due. Having borrowed more in the 2020/21 fiscal year than at any time since records began in 1946, more of this debt will have to be absorbed by the market if the Bank of England starts to wind down its purchases of gilts this year.  That’s one of a number of factors that make us cautious about UK gilts.

Investment Insights Q4  2021


Liz Savage and Ed Smith

Co-chief investment officers

Read the latest version of Investment Insights, Q1 2022