Outlook 2022: Daniel Morris (BNP Paribas Asset Management)

Outlook 2022: Daniel Morris (BNP Paribas Asset Management)

Outlook 2022 Outlook
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By Daniel Morris, Chief Market Strategist at BNP Paribas Asset Management

What is the economic outlook for 2022?

‘The restoration of supply chains, reallocation of labour, and rebalancing of supply and demand, will be the key factors determining economic growth in 2022 and the strength and persistence of inflation.

The support provided by governments and central banks since the outbreak of the COVID-19 pandemic ensured that the world does not suffer from a lack of demand. Consumer and business confidence are high, households are spending, businesses are investing.

The problems faced by the world economy stem from the inability to meet that demand, either because components or workers are lacking, or because products cannot be delivered. Some of these constraints on production will last longer than others (notably semiconductors), but they will resolve themselves eventually, enabling economies to revert to trend growth rates without generating higher inflation.

For most major economies those growth rates next year will be above average (between 4-6% in the US and Europe), even as the rate decelerates with the boost from reopening fading and countries making up the ground lost during lockdowns.

Even as COVID-19 outbreaks occasionally brake growth and interest rates rise, the global economic recovery is continuing and the macroeconomic outlook is positive. Earnings growth rates will inevitably decelerate next year, but equities remain one of the best performing asset classes in an environment of rising inflation.

The same fundamentals which favour equities also support corporate credit. Credit metrics are encouraging, though low spreads will limit the amount of outperformance.’

Earnings growth rates will inevitably decelerate next year, but equities remain one of the best performing asset classes in an environment of rising inflation.