The JP Morgan manager expects inflation to remain at high levels during the first months of the year, but anticipates a decrease in price increases towards the end of 2022 due to a return to pre-pandemic consumption habits. Inflation will be the “big topic” again this year, standing at the highest levels of the last 20 years.
“We believe that there are transitory and persistent factors that explain the current inflation. As transitory we identify the great demand that has been seen after the confinements of goods versus services, which has meant that supply has not been able to counteract demand and price increases have been seen in goods. However, a more normalized life and a return to pre-pandemic consumption habits can reduce this impact. The most persistent factors are salary pressure in the United States or the shortage of labor in the country”, explains Lucía Gutiérrez-Mellado, director of strategy at JP Morgan Asset Management for Spain and Portugal.
The pandemic, which continues to kick in, will be one of the main risks for the economy in 2022, although governments are reacting better than in the first waves and their impact is less and less. Bottlenecks in supply chains will be another concern for the markets, although the situation will improve throughout this year and next.
The sector most affected by this problem is the automobile sector, due to its dependence on semiconductors, which has raised the price of second hand cars. Gutiérrez-Mellado has maintained that little by little a normalization in this sense should be seen.
The withdrawal of fiscal stimuli and how this is going to affect global growth is the third risk of those pointed out by the firm, which has explained that consumers and companies “are strong enough” to pull growth without these aids.
Regarding economic growth, JP Morgan Asset Management has a constructive vision for this 2022 although it places the progress of the world economy below the increase in Gross Domestic Product (GDP) that has been seen in 2021. “China is stabilizing and In the US and Europe, the private sector and families have the ability to drive growth economic. The health of the household economy is good, economic sentiment has room for improvement and indebtedness is not too high. Savings rates remain above pre-pandemic levels. Companies are investing and have a lower level of leverage than at the start of Covid-19,” Gutiérrez-Mellado remarks.
JP Morgan Asset Management does not expect rate hikes in Europe until next year, while the US Federal Reserve (Fed) will carry them out soon. However, he points out that the market is discounting a stronger stimulus withdrawal than the firm expects, which it maintains will be more relaxed.
From the manager of JP Morgan they maintain that 2022 will be a year with volatility in which profitability will be lower compared to what has been seen in 2020 and 2021, while it will be necessary to look for value in equities, ‘high yield’ and alternative management funds, which can de-correlate portfolios and provide returns.
In equities, the bet of the US entity goes through small US companies that are linked to domestic consumption, European and Japanese cyclical companies and quality stocks in the US. That is, a balance between growth and investment in value. “The technology sector will have more discreet returns this year in a scenario of profitability for the highest bonds, after years beating expectations and behaving extraordinarily well”, comments Gutiérrez-Mellado.
In emerging markets, the firm’s position is neutral after a difficult year for this type of asset. In the case of fixed income, they believe that “sovereign bonds still have an upward path” after the ten-year German ‘bund’ has been at 0% for the first time since May 2019. In any case, they believe that fixed income positioning should be flexible and global, but that 2022 will continue to be a “complicated” year for this range of products.
In funds, JP Morgan AM believes that its range of liquid alternatives can work well and they also maintain that the JPMorgan Funds – Global Value Fund, the JPMorgan Funds – Global Sustainable Equity Fund and the JP Morgan Income Fund for the part portfolio keeper.