Bank says fundamental outlook remains supportive
Emirates NBD has said it expects 2022 to be a “year of many uncertainties”, although the fundamental backdrop remains supportive and positive returns will continue.
The bank, which recently released its 2022 Outlook, said volatility this year could constantly reshape opportunities and risks around some key market-moving questions.
Maurice Gravier, the bank’s chief investment officer, noted that unlike in 2021, positive returns for the next several months will be “modest.”
“2022 should be different. The fundamental backdrop remains supportive, and we expect positive returns. They are however modest,” he said.
“Uncertainty is high: from inflation to central banks, with interest rates in the middle, there is no shortage of potential catalysts for market anxiety.”
However, the bank said there is confidence in the ongoing economic recovery and that it considers the tightening of extraordinary monetary support to be inevitable and justified.
It cited that “imminent” economic recovery is “boosted by widespread distribution of the vaccines and governments’ fiscal stimulus amidst a low interest rate regime supporting elevated valuations.”
“This limits the upside potential for the most defensive assets, including typically government bonds from developed markets,” noted Gravier.
Gravier added that an opportunistic mindset is key for 2022, which is why the bank is starting the year with less active deviations from its strategic positioning than in recent years, and a little more cash.
“We are, for example, neutral on both stocks from developed markets and gold, a change compared to 2021,” he said.
“We, however, of course see opportunities: stocks from the UAE and India, as well as debt from emerging markets, and importantly hedge-funds, with asymmetrical risk/return profiles.”
He also noted that expected returns are not high for the decade to come. “The good old times when you could just sleep on a simple asset allocation are over.”
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