Speaking at the firm’s 2022 outlook event, Wei Li said: “We’re expecting another up year for equities and another down year for bonds.
“It’s rare for this combination to take place, so if this were to happen twice, consecutively in two years, then this, in our view, defines a new market.”
She said inflation was likely to settle on higher levels than pre-Covid, even as supply bottlenecks ease.
“We expect the Fed to kick off rate hikes, but remain more tolerant of inflation than previously.
“What does this mean for investing? As we head into next year [we expect a] combination of very robust growth dynamics, even if delayed somewhat, and a historically low real rate environment.”
This combination should be supportive of risk assets, which is why the firm is bullish on equities, she said.
“Although because of the wide range of possible economic outcomes at this juncture, we are also cognisant of the other scenarios that could play out and as a result we’re trimming risk somewhat.”
Li said investors should expect more confusion going into 2022, however.
“We have never experienced a [market] restart like this. And on top of that, you throw in the repeated data surprises to the mix, both to the upside and to the downside.
“Confusion is only natural for policymakers as well as for markets as we adapt to this new reality.
“Cutting through the confusion is really key in navigating markets in 2022.”