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ANZ’s warning: ‘Don’t expect double-digit returns in 2022’

·2-min read
A person holding $100 Australian notes and the ANZ logo on the exterior of a building.
ANZ said stock markets this year will see heightened volatility. (Source: Getty)

ANZ has released its predictions for what will happen with markets this year and volatility seems to be the name of the game.

However, despite market swings, the bank still has a broadly optimistic outlook - albeit a cautious one.

“As 2022 gets underway, we maintain our broadly optimistic tone for risk assets but would warn against any expectations of double-digit returns from equities like those experienced in 2021,” ANZ private banking and advice head of investment strategy Lakshman Anantakrishnan said.

“Rather, we commence the year with a mild overweight to risk assets based on cautious optimism and a belief that, despite more moderate returns in 2022, equities should continue to outperform bonds and cash.”

Anantakrishnan said US stocks were expected to perform the best - which would make it the fifth year in a row the nation's markets outperformed the rest of the world.

However, Australia should be the frontrunner when it comes to GDP growth. Anantakrishnan said he expected Australia’s economy to grow 5.1 per cent this year.

This will be followed by the US (4.5 per cent) and Europe (4.4 per cent). China’s growth is expected to slow down to 4.6 per cent - which would represent the weakest growth for the country in modern history.

“This scenario represents our base case for 2022 and, as always, there are potential downside and upside risks to any setting,” Anantakrishnan said.

“At this point, key downside risks centre on Omicron, the potential for further COVID-19 mutations and inflationary pressures or, more specifically, how central banks tackle these.”

COVID fears

Anantakrishnan warned that COVID-19 variants had the potential to “unhinge the global recovery”.

“[COVID-19 variants could] bring further widespread lockdowns, more persistent supply chain pressures and, with them, sustained elevated inflation,” he said.

“Positively though, despite the rapid spread of the newest mutation Omicron, so far it appears to be less virulent than Delta, and governments are largely resisting the need for broad-based lockdowns.”

Anantakrishnan said that as medicine continued to advance and vaccination rates rose, the world was becoming better equipped to deal with COVID.

“[These] provide hope that Omicron or any further virus mutations will become speedbumps rather than brick walls for the global growth agenda in 2022,” he said.

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