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Alternative Market Briefing

The Big Picture: 2022 - the year of the great normalisation

Wednesday, January 19, 2022

B. G., Opalesque Geneva:

2022 will be the year of 'the great normalisation', according to Unigestion, a large Swiss asset manager. Indeed, after two turbulent years of deep recession and extreme recovery, the manager expects stabilisation of policy mix, economic activity, and inflation.

These views will be further expounded in the Opalesque masterclass webinar, The end of easy money. What now? on 16th and 17th February.

Flexibility in views and positioning is key this year

"The New Year should see slowing growth and inflation as inventories turn from headwinds to tailwinds. There is also a genuine chance of hitting a fiscal cliff, while major central banks simultaneously engage in a new cycle of hikes. All of these factors will likely provoke volatility in the markets and trigger large dispersions across and within assets.

"Against this backdrop, flexibility in views and positioning are key to navigating a world where any incremental change could dramatically affect market sentiment," say the authors of Unigestion's Q1 2022 macro investment views report, Guilhem Savry, head of macro and dynamic allocation, and Sylvain Asimus, client portfolio manager.

The good news, they add, is that current expectations for monetary policy and earnings growth incorporate too much inflation and too little growth.

If in 2021, real assets outperformed thanks to rising inflation pressures from depressed levels, 2022's inflation expectations are priced for "perfection", they continue. That is, investors are anticipating too much of a continuation of recent trends, which could realistically only prevail if there were external events affecting them.

Therefore they prefer, in 2022, equities instead of fixed income assets, secular growth stocks with a large bias toward US corporates as opposed to value stocks, and defensive assets such as sovereign long-term bonds.

Gradual deceleration of growth and inflation expected

The authors do not believe 2022 will cascade into stagflation, as many think, but rather, they see a gradual deceleration of growth and inflation induced by easing supply constraints, which in turn should lessen the pressure on central banks to hike as aggressively as currently anticipated.

History shows US equities and the US dollar benefit in the first 12 months following a new rate hike by the Fed, and the current cycle will be no exception - especially in light of the very short and shallow upwards path that Fed funds are likely to take, they say.

Asset allocation with strong focus on the US

At Unigestion, this year's asset allocation will focus on quality equities that offer solid earnings growth; US equities - because of higher flexibility in the US policy mix and its corporate leadership in key sectors; and the US dollar that should benefit from stronger US GDP and higher liquidity levels.

They will decrease allocation in real assets. This is because current pricing in both inflation breakevens and energy prices reflect a long-lasting expansion period in the global cycle which, given the potential headwinds, is now too optimistic.

The authors expect a gentle, Yellen-like rate hike cycle - rather than the "massacre" engineered by Volcker in the 1970s. However, policy mistakes could happen and should be factored in through managing risk in the short term.

The same goes for Covid, which might yield further variants of greater seriousness. This scenario could put us back to square one, they say, with lockdowns and restrictions restarting massive fiscal and monetary stimulus to combat deflation and defaults.

But if those two great risks do not show up, it may be time after two tumultuous years for a great normalisation, where life reverts to pre-2020 to some degree.

Unigestion is an independent specialist asset manager headquartered in Geneva, established in 1971, with $22bn in AuM across equities, private equity, liquid alternatives and multi-assets.


WEBINAR: The end of easy money. What now?

• How to navigate in a year of normalization
• Inflation peaks and cycle converge toward potential growth
• The risk of negative second derivatives on asset return dynamic

Master Class (US time zone) - February 16th
With Olivier Marciot, Director, Portfolio Manager, Cross Asset Solutions-Investment
When: Wednesday, February 16th, 2022 - ET 11 am, PT 8 am, UK 4 pm, CET 5 pm

Master Class (ME/Asia time zone) - February 17th
With Jeremy Gatto, Senior Vice President, Portfolio Manager, Cross Asset Solutions-Investment
When: Thursday, February 17th, 2022 - Beijing / HKG / SIN 2 pm, Sydney 5 pm, Dubai 10 am, Riyadh 9 am, GVA 7 am

Free registration here:


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