Outlook 2022: What does the new year have in store for investors?

21 December 2021 by National Bank Investments

It’s been nearly two years since the world documented its first COVID-19 case and a global pandemic was declared by public health authorities. Since then, humanity has come a long way, administering nearly 7.1 billion vaccine doses globally.

Markets also finished the year on the front foot, with U.S. stocks racing through 2021 at full throttle. Having exceeded the expectations of most investors over the last year, what surprises are in store for markets in the new year? Our experts weigh in!

What do our NBI experts think?

1. The economic recovery should ensue, but the pace of growth will slow.

Imbalances exacerbated by the pandemic should begin to unwind, paving the way for the gradual normalization of ultra-accommodative monetary policies and a gradual phase out of emergency fiscal support by many developed countries.

2. Waves of COVID-19 cases likely to arise at different times in different countries.

Hospitalizations and deaths should remain far from reaching a state of crisis thanks to the success of vaccination campaigns ramping up in developing countries. Will an improvement in global vaccine coverage allow us to declare victory over the pandemic? Only time will tell.

3. Annual inflation declines but remains volatile.

Several transitory factors exerting upward pressure on prices abate. Still a strong economy and structural factors keep inflation relatively high.

Fixed Income

When compared to equities, the risk/reward outlook for bonds remains weak.

With rate hikes on the horizon in 2022, corporate and shorter term fixed income securities should outperform their peers.

Equities

As interest rates rise, equities tend to outperform bonds on average.

In this enviornment, Canadian and U.S. equities should outperform EAFE and emerging market (EM) equities in 2022.

Icône d'une charte graphique en pointe de tarte

A good balance between defensive/growth (S&P 500) and cyclical/value (S&P/TSX) stocks could improve overall diversification.

Tighter monetary policy, slowing global growth and a stronger U.S. dollar can negatively impact EM while structural factors could cause EAFE equities to underperform.

Commodities and currencies

Gold prices likely to underperform if real yields rise. However, they remain an inexpensive insurance against inflation surprises.

Icône d'un signe de dollar dans un cercle

The U.S. dollar is still attractive due to its safe haven status. In comparison, the loonie is hovering next to its intrinsic value and does not signal any major opportunities.

Looking back at 2021

If the last 2 years have taught us anything, it’s that we should never take anything for granted during a pandemic. Emerging variants, fluctuating case counts and uncertainty regarding major central banks' narratives toward inflationary pressures could all create more volatility in the new year. That being said, it is important for investors to remain focused on the end goal and not react to short term aberrations.

NBI solutions seek to provide superior risk adjusted investment returns over the long term, regardless of market conditions. Here are some of the year’s top performing strategies from the NBI lineup:

F series returns as at December 8, 2021
F series returns as at December 8, 2021	YTD	1-year	3-years	5-years	10-years	Since inception	Inception Date
NBI U.S. Equity Private Portfolio*	31,34%	35,45%	26,28%	22,31%	-	19,51%	2015-05-21
NBI U.S. High Conviction Equity Private Portfolio*	26,56%	28,60%	22,41%	20,16%	-	17,91%	2015-05-21
NBI U.S. Equity Fund	26,15%	28,23%	21,64%	19,68%	-	18,86%	2013-12-24
NBI Active Canadian Preferred Shares ETF	24,92%	28,96%	-	-	-	12,50%	2019-01-15
NBI Canadian High Conviction Equity Private Portfolio*	24,75%	26,67%	11,58%	8,23%	-	6,67%	2015-05-21
NBI Canadian Family Business ETF	23,81%	27,32%	-	-	-	15,24%	2019-01-15
NBI Canadian Equity Private Portfolio*	23,78%	25,64%	12,55%	7,74%	-	6,00%	2015-05-21
NBI SmartData US Equity Fund	22,59%	24,45%	16,66%	14,44%	15,39%	11,29%	2008-05-16
NBI Global Equity Fund	19,83%	23,48%	19,62%	17,79%	-	15,76%	2013-12-24
NBI Sustainable Global Equity ETF	19,76%	25,77%	-	-	-	32,64%	2020-01-23
NBI International High Conviction Equity Private Portfolio*	11,37%	14,77%	17,95%	15,60%	-	11,57%	2015-05-21
NBI Floating Rate Income Fund	4,86%	6,15%	3,83%	3,31%	-	2,44%	2014-01-08
NBI Unconstrained Fixed Income Fund	-0,37%	0,54%	4,64%	1,95%	-	1,95%	2016-11-18
*Exclusive to NBF advisors only

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