Uncertainty is high in the global economy from inflation to central banks and there is no shortage of potential catalysts for market anxiety, according to the latest outlook from Emirates NBD.
Maurice Gravier, chief investment officer at Dubai’s largest bank, revealed the new outlook themed “Low Visibility Ahead”.
Gravier outlined his investment strategy for a year of many uncertainties – “a transition to more normal fundamental returns, but not without turbulence”.
The CIO and his team said they are prepared to be more proactive than reactive, as volatility could constantly reshape opportunities and risks around some key market-moving questions.
He said: “2021 was about conviction and consistency. Conviction in the economic recovery, and thus a very stable pro cyclical positioning, favouring equities over bonds all year long.
“2022 should be different. The fundamental backdrop remains supportive, and we expect positive returns. They are however modest. By contrast, uncertainty is high: from inflation to central banks, with interest rates in the middle, there is no shortage of potential catalysts for market anxiety.”
The CIO said he remains confident of an ongoing economic recovery and considers the tightening of extraordinary monetary support as both “inevitable and justified”.
He predicted that an imminent economic recovery boosted by widespread distribution of the vaccines and governments’ fiscal stimulus amid a low interest rate regime would support elevated valuations.
Gravier said: “This limits the upside potential for the most defensive assets, including typically government bonds from developed markets. Having said that, we all know that markets can overreact, and we would of course consider buying them if and when yields become attractive again. This is why we remain underweight on this segment to start the year with.”
He added: “An opportunistic mindset is key for 2022. This is why we start the year with less active deviations from our strategic positioning than in the recent years, and a little more cash. We are for example neutral on both stocks from developed markets and gold, a change compared to 2021.
“We however of course see opportunities: stocks from the UAE and India, as well as debt from emerging markets, and importantly hedge-funds, with asymmetrical risk/return profiles.
“We reiterate that expected returns are not high for the decade to come. The good old times when you could just sleep on a simple asset allocation are over.”
The annual Emirates NBD CIO Outlook is an advisory blueprint covering investment opportunities and key global economic indicators and in-depth financial market insights.
The Emirates NBD CIO Global Investment Outlook 2022 Webinar takes place on Wednesday, 9th February 2022, 12:00 noon (UAE time). REGISTER NOW http://ms.spr.ly/6048wBwJi
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