. the idea
Three years of extraordinary performance have ignited the debate about equity market valuations and the imminence of a correction into 2022.
. the risk
China is going through an unusual period of uncertainty. Last year, a self-imposed crackdown on tech crushed large parts of the equity market.
. the chart
. the idea
Driven by energy efficiency, US fiscal programmes and automation, we see sustainability megatrends continue fueling higher-than-usual organic growth for industrial names. We are particularly positive on Capital Goods.
. the risk
In the same vein as last year, the key risk in 2022 for active equity selection will be rotation. On the one hand, diverging monetary policies could be favorable to Europe while higher interest rates could benefit Value stocks.
. the chart
. the idea
In a similar vein to the Fed and Bank of England, the ECB’s December meeting signalled a shift in reaction function, along with a humbler description of the inflation outlook.
. the risk
A faster and harder tightening of monetary policy by the Fed is the risk factor most present in our minds as, in our opinion, odds are high that core inflation settles at a level uncomfortably higher than the Fed’s objectives in a context of tight labour markets.
. the chart
. the idea
Our best idea for 2022 is to get exposure to the airline sector by investing in the German MTU 0.05% 2027 convertible bond.
. the risk
In the current interest rate environment, most of the performance of directional convertible funds will once again come from equities.
. the chart