Liontrust: our fund managers’ outlook for 2022 - Flipbook - Page 4
JOHN HUSSELBEE, MULTI-ASSET TEAM
Global economy is starting to reach escape
velocity from the pandemic
Our view is that while interest rate hikes and tapering of asset purchases might feel concerning
in the short term, they are ultimately a positive signal that the global economy is starting to
reach escape velocity from the pandemic – although the Omicron variant obviously brings a
fresh sense of uncertainty.
Putting that aside for now, we have
come faster to the current mid-cycle point than expected, in
18 months rather than the more typical four or five years. But no
one should be surprised to see such an accelerated cycle given the
unprecedented levels of monetary and fiscal stimulus used to keep
the world functioning amid the pandemic.
Concerns around higher UK interest
rates also serve as a reminder
that, while this might dominate
commentator chatter, we are
running diversified portfolios for which the impact of exactly when
the Bank of England chooses to hike or not should be limited.
While inflation might remain elevated for part of next year – again,
headlines about a recent 40-year high in the US are dominating
chatter – we remain confident levels should drop away in the
medium term as the rolling Covid base effects, with gas prices
causing a spike one month and used cars the next, gradually
work their way through the system. Meanwhile, conditions are in
place for a sustained boom in real growth with excess savings
boosting consumption and an accompanying tailwind from falling
unemployment.
Overall, we expect equities to remain the main driver of returns
and therefore continue to be overweight, while we have removed
some duration from our fixed income allocation as central banks
prevaricate over the timing and extent of rate rises and tapering.
There remains a split between bulls and bears with respect
to economic outlook so we prefer to take a balanced, flexible
approach where we can focus on long-term themes and build
diversified portfolios able to perform throughout the cycle.
4 - Liontrust Views: Outlook for 2022