|2022/01/10 / Erste Group Research|
Global Strategy 1Q 2022
Strongly rising numbers of new COVID-19 infections, higher energy prices, and persistent bottlenecks in supply chains are dampening the short-term growth outlook. Beyond that horizon, the economic recovery should continue. The central banks will continue to reduce their purchase programmes. Interest rates should rise in the USA in 2022 but remain unchanged in the Eurozone. We continue to prefer investments in equity markets and broadly diversified investments in high-yield corporate bonds and investment grade hybrid bonds.
Economy: After the substantial economic recovery in 2Q and 3Q 2021, high new COVID-19 infection rates and a new virus variant dampen the short-term growth outlook. This situation is complemented by supply-side bottlenecks that have lasted longer than expected and a drastic increase in energy prices. In this environment, both private consumption and the willingness to invest could suffer temporarily. However, the supply chain bottlenecks should be resolved over time and the situation on the energy markets should normalise. Therefore, we expect the economic recovery to continue despite these short-term challenges. Inflation has increased more significantly than anticipated in the short run but should fall back in the medium term due to base effects and the receding pressure from energy prices. The medium-term inflation development will hinge on the state of the job markets and the resulting wage pressure.
Bonds: The ECB has defined a very clear path for monetary policy for the year 2022. The purchasing program PEPP is set to end at the close of March. At the same time, the purchases made under the APP will be raised from April and then reduced to EUR 20bn per month over the rest of the year. We believe that interest rate increases are still far off, as it is not clear at this point when the ECB will reach its medium-term inflation target of 2%. The Fed will discontinue its bond purchases already in March rather than, as originally planned, around the middle of the year. This gives the Fed more room to manoeuvre, should more rapid interest rate hikes become necessary. The development on the job market will be crucial to his question. Both central banks could be confronted with contradictory data in the coming weeks in view of high rates of new infections and challenges to the supply side. The economic recovery should continue throughout the year, which is why we expect the ECB and the Fed to stay on course. The yields of 10Y German government bonds and US Treasuries should move sideways and at best edge moderately higher until the end of the year.
Currencies: A correction of excessive interest rate expectations in the USA could slightly weaken the US dollar in 1Q; beyond that, we expect a sideways movement around 1.15. Negative real yields and safe-haven flows should support the gold price in 1Q. Due to political risks, the Swiss franc could also continue to hold steady at relatively strong levels in 1Q.
Equities: Global companies will be faced with declining earnings growth in 2022 relative to 2021, and the performance of the leading indices of the developed markets should fall short of last year’s development. We expect the global equity market to achieve gains of 0 to 5% in 1Q.
Download PDF (986kB)
|Author||Erste Group Research|
|Product name||Global Strategy|
|Topic in focus||Credits/ Corporate bonds, FX, Macro/ Fixed income|
|Economy in focus||Austria, Croatia, Czech Republic, Eurozone, Germany, Hungary, Poland, Romania, Russia, Serbia, Slovakia, Slovenia, Switzerland, Turkey, United States|
|Currency in focus||Croatian Kuna, Czech Koruna, Euro, Hungarian Forint, Polish Zloty, Romanian Leu, Serbian dinar, Swiss Franc, Turkish Lira, US Dollar|
|Sector in focus||-|
Any information, material and services regarding financial instruments and securities provided by Erste Group Bank AG or any of its affiliates (collectively “Erste Group“) on this and any linked website hereafter (jointly the “Websites”) shall be exclusively to investors who are not subject to any legal sale or purchase restrictions (the “Interested Party“).
The publication and distribution of information as well as offering and selling of products and services described on the Websites is prohibited by law in some jurisdictions. For this reason, persons in countries in which the publication as well as the offering and selling of products and services described on the Websites are not permitted by law, must not enter the Websites and/or acquire the products displayed on the Websites.
Neither Erste Group nor any third party shall offer access to the Websites or offer the products to especially, but not limited to citizen/residents of the United States and “U.S. person” (as defined in Regulation S under the US Securities Act 1933 as amended). For this reason, the distribution or redistribution of the information, materials and products into United States or into any other jurisdiction where it is not permitted under the applicable law, as well as to the citizens/residents of these countries shall be prohibited. The securities displayed on the Websites have not been and will not be registered under the US Securities Act of 1933 and trading in the securities has not been approved for purposes of the US Commodities Exchange Act of 1936. For this reason the securities may, inter alia, not be offered, sold or delivered within the United States or, for the account and benefit of U.S. persons.
The Interested Party is solely responsible to examine, whether he may enter the Websites under the law applicable to it. Erste Group shall not be responsible for the distribution of content of any of the Websites to individuals or entities which provide false information about their right to enter the Websites. For this reason Erste Group shall not be liable for any legal claims or damages which may result from the unauthorized entering or reading of the Websites.
By agreeing to this hereto, the Interested Party confirms that
(i) It has read, understood and accepted this Information and the Disclaimer;
(ii) It informed itself about any possible legal restriction and warrants that it is not restricted or prohibited to enter the Websites according to any law applicable; and
(iii) It does not make available the contents of the Websites to any person who is not qualified by law to enter the Websites.