2022 Market Outlook From Columbia Threadneedle Investments - Changing Monetary Environment Sets the Backdrop for a Year of Change In 2022 - Seite 2

One reason we believe inflation will ultimately fall in 2022 is due to improvements in the supply chain. Regardless of whether you believe Covid or other structural and political factors (in Europe especially) are to blame, many of us underestimated the degree to which the supply chain would impact the corporate backdrop. If overordering then falls, there remains the risk of an inventory-led recession in some areas, notably automobiles and semi-conductors, as manufacturers who underestimated order levels during the pandemic have depleted inventories to cope. Indeed, recent estimates from industry analysts see semiconductor shortages extending into 2023.

But despite the ongoing challenge of disruption at transport hubs and a shortage of labour, we have seen recent signs of improvement. In some sectors, notably retail, companies continue to benefit from a less concentrated and more agile supply chain, while manufacturers, transporters and retailers are all working hard to make up ground lost in 2021 against steady consumer demand. It is our belief that the supply chain headwinds will continue to become less dominant in 2022, but it may well be towards the latter half of the year before the positive impacts are felt.

Quality will out

We have seen good earnings recovery this year, a reflection of relatively strong balance sheet management by corporates, with stricter cost controls and strong discipline around dividends and share buybacks. The reopening trade and enduring rebound in demand has resulted in heightened cash flows which have boosted corporate coffers, giving companies the tools to reduce leverage.

But given those supply chain bottlenecks and the persistence of inflation, it will be harder for companies to beat forecasts in the way they have in 2021, at least in the short term. For companies, we anticipate next year will be a return to the familiar cycle of earnings disappointment as opposed to positive surprises.

In previous cycles when the yield curve has flattened, the impact on equities has seen investors seek quality companies that could survive any impending rates shock. As we head into 2022 we have seen the yield curve steepen, flatten and rise across the curve again, and that has led to a more mixed scenario in terms of what is leading the market – I do not see that changing in the short term, but some areas that outperformed more recently might struggle, such as “meme” stocks – those that become popular among retail investors through social media platforms. The companies we like – quality businesses with solid balance sheets and competitive advantages – stand a better chance of weathering volatility.