Home »Economy» What Is The Best Exchange Strategy In A High Inflation Scenario? December 27, 2021
What is the best trading strategy in the context of high inflation Yes less support from central banks like the one expected in 2022?
Dec. 27, 2021
The strategists of the Swiss company UBP (Union Bancaire Privée) note that in the equities sector, “although the outlook for 2022 remains positive, Profitability should be more moderate, with greater volatility in the future“.
According to his prognosis “Earnings growth should continue to support equitieswhile valuations will weaken. “
Hence, they will reduce the bias towards companies from “Growth with quality companies“Because they are considering that”Corporate profits are key to generating returns“For the next twelve months. This is because they are anticipating higher bond yields next yearthat will lower the valuations of many technology companies that are discounting future cash flows.
For more discerning investors, they also comment that “Hedge funds are valuable for generating alpha in volatile markets. As the market environment shifts towards volatility, we are looking for ways to switch some of our directional equity exposure to a bullish / bearish “stocks” strategy.
TWO INCREASE IN FED RATES
From UBP they are waiting “two rate hikes in 2022“By the Federal Reserve (Fed) in their new destination, the high inflation In the US, this is not to say that monetary tightening, which is still at an early stage, is hurting equity market investors.
“Since the early 1970s, equity investors have done relatively well, with US stocks rising, albeit modestly in some cases, up to seven of the nine rate hike cycles“They affirm.
“Since the turn of the century,” they add, “equity investors” got better resultssince four rate hike cycles consistently delivered positive returns, with a on average just under 7%“.
This could be the key for 2022. Many analysts think a prominent year like 2021 on Wall Street is very unlikely as the indices are on track to close the year with gains of 20-25%. With that in mind, most are analysts Expect average returns below 10% for US stocksTherefore, it will be crucial to focus investments well and select the companies that can be more positive in the coming year.
“Although we are starting the new year constructively, the visibility is lowered, which means that the volatility should increase in the future“They remarked from UBP.
“As a result, We are increasing our commitment to quality growth in our share allocation. Company with Good returns are especially valuable when the uncertainties are high“, Close.