What can we expect from 2022? Which sectors will be booming and which may see some pull back?
First things first, CommSec chief economist Craig James said 2022 would not be like the past two years, which were plagued with COVID-19.
“An unprecedented amount of fiscal and monetary stimulus, sustained by investor optimism, has resulted in gains across global equity markets,” James said.
“As a result, global share market indexes will start 2022 at, or near, all-time highs.”
Here are four major themes that will shape the investor landscape in Australia in the year ahead.
1. Less risk taking
James said investors were likely to adopt an increasingly focused approach to portfolio construction, staying away from major risk taking.
“Share market performance in the coming calendar year will be contingent on the risk appetite of investors who have had to construct investment theses in a period where risks grew amidst broader economic expansion initiatives,” James said.
He said the risk-averse sentiment may hit investment gains as investors chose to play it safe.
He said this could lead to less investment in diversified portfolios and listed exchange traded funds (ETFs).
Additionally, James warned investors would still need to pay attention to changes in monetary policy, negative real estate rates, company profits and supply chain disruptions.
2. Focus on miners and materials
James said that in 2021, we saw key sectors benefit from the global recovery as economies reopened.
“However, this brings into question how much upside still lies ahead in 2022,” he said.
James said the materials sector made historic movements in 2021, with extreme highs and lows but the outlook was more optimistic going forward.
He said investors were also turning their eyes towards gold to hedge against inflation, and as a safe-haven asset.
“Diversified miners are also likely to benefit from their exposure to a variety of minerals, including those which provide exposure to late-cycle growth, such as the battery market, including nickel and lithium.”
Additionally, James said the global move towards more ‘green-energy’ would exist as a long-term structural change, and would continue to provide upside to miners that had exposure to such minerals.
3. Retailers will struggle
Increased household savings, combined with pent-up demand, contributed to record profits for retailers in 2021 but James thought this was not likely to continue.
He said brick-and-mortar stores would also continue to be impacted by supply chain issues and higher shipping costs.
4. Labour shortages and supply chain issues
Industrial companies were also impacted in 2021 by supply chain disruptions and the lack of raw materials, James said.
Labour shortages also added volatility to the operating environment, and James said this would likely continue through 2022.
“These problems are likely to persist into 2022, and will only ease slowly as bottlenecks become unblocked,” he said.