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Sunday, May 29, 2022

Overall optimistic outlook for investors for 2022: ANZ

Investors may remain generally optimistic about 2022, but ANZ warns in its Market Outlook report that further double-digit returns on equity, as seen in 2021, are unlikely.

“Rather, 2022 starts with a slight edge against risky assets, based on cautious optimism and the belief that, despite more moderate returns, equities should continue to outperform bonds and cash — albeit amid heightened volatility.” said Lakshman, head of investment strategy at ANZ. Anantakrishnan said.

During a year of uncertainty and lockdown, global equity markets jumped 20.7% in 2021, after rising 14% the previous year, according to the MSCI World Index.

“These gains have been underpinned by incredibly strong income growth and the continuation of unconventional monetary policy and fiscal instruments normally reserved for wartime,” Anantakrishnan said.

Despite an overall upbeat outlook for 2022, equity markets around the world have fallen since the start of the year.

Shane Oliver, head of investment strategy at AMP Capital, noted that periodic market corrections of up to 20 percent are “healthy and normal.”

“While stock market pullbacks can be painful, they are helpful because they help limit complacency and excessive risk,” Oliver said.

He also advised investors to “mute the noise” of the negative news that often reports stock market crashes.

“But such headlines are often just misrepresentation. We are never told about the billions the market is recovering and the rising long-term stock price trend is adding to the stock market,” Oliver said.

Australian Stock Exchange (ASX) indicator board in Sydney, Australia on February 5, 2019. (AAP Image/Dan Himbrechts)

inflationary pressure

The All Ordinaries index on the Australian Securities Exchange fell on Jan. 25 after the release of inflation data that showed core inflation jumped 2.6 percent.

Inflationary pressures developing around the world have prevented a sustained expansionary monetary policy, signaling higher official interest rates by many central banks around the world.

The Bank of England and the Reserve Bank of New Zealand have already begun raising rates, while the US Federal Reserve has also announced plans to start raising rates in March.

“Inflationary pressures, and more specifically the response function of central banks, will arguably have the biggest impact on asset prices this year,” Anantakrishnan said.

In Australia, the lifting of border restrictions, high vaccination rates, high household savings and pent-up demand are expected to contribute to strong economic growth.

Given these factors, both ANZ Bank and Commonwealth Bank expect the national economy to grow by 5.1 percent, the most significant annual growth since the late 1980s. Westpac Bank forecasts stronger annual growth of 5.5%.

ANZ believes current risks will push the economy into an earlier interest rate cycle. Spillover risks include actual spending exceeding already strong forecasts, an earlier labor market tightening, or a faster-than-expected acceleration in wage growth.

Negative risks are associated with the COVID-19 pandemic, such as more options, outbreaks and lockdowns.

Domestically, inflation has lagged behind other major economies, leading the Reserve Bank of Australia (RBA) to reaffirm its patience with a rate hike.

However, as the latest inflation data is well above the RBA’s forecasts, economists expect the RBA to change its forecasts soon.

The Board of Directors of the RBA will hold its first financial meeting this year on 1 February.

Rebecca Zhu

To follow

Rebecca Zhu is an Australian reporter based in Sydney. She focuses on the Australian economy, real estate and education. Contact her at rebecca.zhu@epochtimes.com.au.

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World Nation News Desk
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