Inflation, geopolitics and asset pricing all issues to watch for RLAM in 2022

Royal London Asset Management (RLAM) has released its Outlook 2022, outlining what investors may expect to see in the year ahead.

While growth remains strong, inflationary pressures, geopolitics and asset pricing, along with the emergence of the Omicron variant, means that confidence and activity remain fragile.

RLAM’s investment managers consider the key risks and rewards that may be encountered in 2022, while Chief Investment Officer, Piers Hillier puts forward three issues he believes we should all be looking at over the next 12 months.

Piers explains why RLAM’s diverse investment processes should help to navigate a very different investment landscape.

Piers Hillier, Chief Investment Officer said: 
“While economic growth has been strong, as economies have largely opened up – inflationary consequences will be a key focus in 2022, global pressures and asset prices are all key issues that we should be looking at this year.

“As a responsible investor, we will continue our work in engaging with companies asking more from them. We are keen to share what we do with clients and we’ll continue to do this throughout the year. We believe that this ‘engaged asset management’ is the next generation of active management.”

Sustainable investing – RLAM retains a long-term positive view of the prospects for sustainable investing, including areas such as technology specifically digitisation, cloud computing and ecommerce and healthcare.

Global equity – Interest rates and inflation will dominate the market discourse for the near future given the impact on discount rates. This will manifest itself in markets in two ways: asset prices in general and style performance within asset classes.

UK Equity Income – The UK market remains an interesting place to invest.  There are many investors out there who have only ever seen inflation being well behaved and the cost of money get ever cheaper.  A shift would be a strong test for businesses, to see who can exhibit cost control and pricing power and which companies are not dependent on the oxygen of cheap money to support themselves.

Multi asset – With such a high level of uncertainty about the future, general investment principles are more important than ever. In the multi asset world this means running the right level of risk, diversifying broadly across asset classes, and employing a flexible and active tactical asset allocation approach that can adjust exposures to keep them appropriate for what could be a fast-moving macro backdrop.

Sterling credit – Against a backdrop of soaring equity markets, growing consumer demand, and high levels of cash balances, corporates are looking strong going into 2022 and the sterling market is well positioned to cope with the roll back of support.

High Yield Markets – RLAM anticipates a good year ahead for global high yield markets – following the market turbulence in the summer, the safety cushion should be big enough to cope with most foreseeable scenarios.

Rates and Cash – Inflation markets have performed strongly in 2021 and we anticipate inflation expectations to drift lower around the second and third quarter of 2022, with base effects beginning to roll off from April onwards.

-ENDS-

The views expressed are those of RLAM at the date of publication unless otherwise indicated, which are subject to change, and is not investment advice.