China’s equity markets have lagged global equities sharply thus far in 2021 in the face of a regulatory crackdown. We expect Chinese equities, particularly China onshore A-shares, to outperform global equities in 2022.
December 2021
Emerging markets ex China equities have underperformed their DM peers this year due, in part, to greater economic and political challenges, which have weighed on sentiment toward the bloc. We expect these issues to persist into next year and are skeptical that EM ex China equities can outperform DM equivalents.
December 2021
Rising inflation and moderating growth are generally associated with a higher risk premium as investors start to price in a potential shift in market regime. In the past, global macro managers have generally benefited from better alpha opportunities that arise from volatility. With this backdrop, we expect macro hedge fund performance to be better than average next year.
December 2021
A market environment with a wider breadth of winners and losers provides greater opportunity for skilled active managers to distinguish themselves. Given the more balanced earnings contribution across sectors relative to 2020–21 and the widely dispersed equity valuations, we expect the breadth of winners and losers will be wider in 2022.
December 2021
Digital assets saw considerable inflows in recent years as investors searched for alternative sources of return amid excessive equity and bond valuations. We expect this momentum will continue next year as regulators increasingly approve easy-to-access cryptocurrency exchange-traded funds (ETFs). Still, global regulatory challenges persist, and cryptoassets will remain highly volatile until there is more clarity on future regulation.
December 2021
The US dollar tends to appreciate during two broad economic regimes. One is when the US economy is materially outperforming its global counterparts, attracting capital looking to benefit from the superior US prospects. The other is when growth slows sharply, attracting safe-haven-seeking capital. This is the “dollar smile” model of the currency, and looking at 2022 through this lens suggests some dollar strength may be in store.
December 2021
Long-dated government bond yields rose in 2021 on strong economic growth and surging inflation. Central banks have maintained their easy money policies despite the rapid recovery in economic conditions, likely keeping yields lower than they would have been otherwise. This may soon change now that several major central banks are starting the process of dialing back support.
December 2021
Consumer price inflation is above pre-pandemic trend in the United States and Europe, while producer prices are surging seemingly everywhere. Consistent with consensus forecasts, we expect mounting inflation pressures to ease by second half 2022 as demand for goods abates and supply constraints moderate.
December 2021