Global CIO video: "We continue to expect solid growth in 2022"
Financial markets have been subject to increased volatility recently, caused in part by the emergence and subsequent rapid spread of the Omicron variant of COVID-19.
Persistently high inflation – with US consumer price inflation at a 40-year high in December – is another area of concern, and central banks including the US Federal Reserve have brought their tightening plans forward. In response, we witnessed a sharp rotation in equity markets away from technology and growth-oriented stocks in favor of European markets and saw a sharp rise in global government bond yields.
In an ad-hoc meeting in late December, the Credit Suisse Investment Committee (IC) decided to bring equity portfolio allocations back from a tactical overweight to neutral, as we sought to mitigate risks in our portfolios.
In the most recent IC meeting in January, we confirmed this neutral tactical allocation, acknowledging that equities benefit from favorable liquidity and financing conditions and continue to offer a yield advantage over high-quality bonds. We still have an underweight in government bonds and expect yields to rise further amid monetary tightening and robust growth.
Over a medium-term horizon, we retain the view that equities provide attractive return prospects. We expect that economic growth in 2022 will be above trend, albeit slower than in 2021, and that the Omicron headwinds should soon ease.