By Alessandro Albano and Francesco Casarella

Investing.com Lockdown, Recovery, and Omicron. The market outlook for 2021 has seen a slew of events, including the return to inflation and the possible decisions by central banks.

Meme stocks such as and and AMC Entertainment Holdings Inc NYSE: have changed the way that markets operate. They have brought to the forefront unexpected characters (the so-called Redditers), who have attempted (and failed to) to be heard in a market too large for them.

Fed Chair Jerome Powell, ECB chair Christine Lagarde, and peers have dominated the headlines, which hung on the thread of an adjective, ‘transitory’, which has never before assumed such a central significance in the markets and in investors’ minds like it did this year, reaffirming that in the era of quantitative easing, communication is the most strategic tool in the toolbox of bankers.

These are some of the key issues that investors need to be aware of. Will 2022 see a return to financial and social normalcy in the long-term? “Trader’s minds are occupied with questions like inflation, whether it will be transitory, the likely rate rises of major central banks and whether high risk assets such as equities and corporate bonds, or are they really sustainable,” says MG Capital. This is a good indicator for what may be coming.

Recap of 2021 Markets

Undoubtedly, 2021 was a great year for major asset classes. The strong performance of commodities, buoyed in part by the ending lockdowns, openings and strong economic recovery, was a testament to their strength. The relative ETF: PA has seen a more than 35% increase in value since the beginning. The Central Banks allowed inflation to persist thanks to their valuation support.

It is important to make the distinction between different commodities because they have not performed well in this year’s economic environment. The precious metals gold and silver have seen a decline, which is quite different from oil, the most important energy source. It’s worth noting that while historically gold is considered a safe-haven asset especially in periods of high inflation and thus works well especially in cases of very high and lasting inflation, it seems that at the moment we are in only the initial phase of this phenomenon.

However, the bond market is a different story. It has been known for many years that people who have bonds will suffer severe losses due to rising rates. These interest rates will likely rise in 2022. The Federal Reserve is the first to increase, while 2021 closes with stable. spreadsEurope, bond yields fell across the entire year. However they managed to rebound during risk-off times (e.g. November). The investment-grade category has fallen around 1% across all bond asset types. According to Eaton Vance Emerging Market Bonds are the worst affected (10%+ decline for local currency), and continue to be under pressure from the strengthening of the which is a substantial part of their debt.

Finally, bears have been disappointed in the stock markets, just like years ago. One bearish theory was that if the stock market rose in 2020, despite economic shut downs and lockdowns due to Covid then markets will surely collapse in 2021. However, once again the bull market, which has been around since 2009 (if you consider March 2020 to be a correction even though it was severe), has maintained its course, hitting short bumps, but rising more or less continuously, rewarding those who avoided timing the markets and stayed with the market.

How to spend 2022

Although it’s impossible to predict the future, Amundi states that investors should begin the year with a prudent/neutral allocation, taking into account high market valuations, and trying to capitalize on relative value opportunities at both the sector and regional levels.

The French asset manager will need to be aware of “the illusions of nominal returns” and aim instead at real returns. While the 60/40 portfolio, which consists of equities/bonds, “will be tested.” Amundi’s experts agree that there will be a positive correlation in stock and bond market returns. Rising rates and pressure on high-cost growth stocks will force Amundi to adjust his asset allocation.

Stock selection should focus on companies with profits and “the power to pass on higher costs to customers, on quality, and on value securities,” while Europe “should be favored thanks to the Next Generation EU program, with particular focus on ecological transition.” Emerging markets should be back in the spotlight by 2022.

The goal of investors, says Matteo Germano, Amundi’s Head of Multi-Asset and CIO Italy, must be “to aim for positive real returns and capital preservation.” The stock market, in his view, is the only viable option. However, we have to be careful about areas that are too high or subject to rising rates. We should instead focus on markets with lower valuations such as the European and Emerging Markets. Diversification is more important than ever.

Analysts at Goldman Sachs Group believe that rising borrowing costs will become a central theme for 2022. With faster and earlier interest rate increases, it is more likely to lead to higher returns.

UBS Group, a Swiss company, predicts that 2022 will be a year of two speeds. The first half of the year will see high growth and inflation rates, favoring “cyclical markets,” such as Europe. They say that the first half of 2022 will see a decrease in inflation and growth, while investors should look for different returns due to the low rates of yields, spreads, and rates.

“Looking further ahead,” UBS adds, “the zero-carbon transition and advancing technological revolutions will represent the most important investment trends of the decade, through opportunities in greentech and sustainable solutions, as well as enabling technologies such as artificial intelligence, big data and cybersecurity.”

You can also read this: 5 Key Factors To Watch For Oil In 2022