8 min read I Date: 17 March 2022
( In partnership with The Edge Malaysia )
Thriving in a climate of change
The outlook for 2022 looks brighter after two years of uncertainty and lockdowns that caused the largest drop in global gross domestic product (GDP) history. According to JP Morgan Global Research, equity markets will continue to thrive as pandemic volatility fades, with private sector fundamentals sustaining above-potential growth. Moreover, consumer spending habits would continue to normalise as supply chain disruptions are easing. Earnings growth appears better than expected, while the China and Emerging Markets (EM) backdrop is set to improve. “Given the nature of the global recovery and shifting pockets of opportunity, sector and security selection across asset classes will be of paramount importance.”
Morgan Stanley estimated that 2022 will be a critical year in which imbalances caused by the pandemic will be resolved and the business cycle will begin to normalise. To investors, this might seem like a return to the previous cycle's secular stagnation. “The economic and market environment in 2022 will be decidedly reflationary, with higher economic growth and higher inflation, and eventually higher real interest rates — in short, a hotter and shorter business cycle. Investors should then be positioned “not for a dearth of economic growth but an abundance of it.” The focus of retooling investment portfolios for 2022 should be on companies that can drive increased tech adoption rather than the few technology makers.
Strength in Impact Investing
According to Principal Asset “Management” and (“Principal”), investors would pay more attention to impact investments as a result to extreme weather change that impacted many lives and businesses, and the planet. In order to sustain the livelihood of humans and the planet, investors increasingly recognise the importance of incorporating sustainability factors into fundamental analysis regardless of strategy or motivation, resulting in the mainstreaming of Environmental, Social, and Governance (ESG) integration. It is still early days for ESG investment in Malaysia. The Economic Outlook 2022 Report by the Ministry of Finance (MOF) pointed out that companies with good ESG performance have not only proven to be more resilient but also better positioned to innovate and capitalise on ESG opportunities during the COVID-19 pandemic.
The Report also highlighted the opportunity for private investors to contribute to three of the most tangible and infrastructure-focused SDGs – SDG6 (Clean Water and Sanitation), SDG7 (Affordable and Clean Energy) and SDG9 (Industry, Innovation and Infrastructure) – in 15 of the world’s fastest-growing economies by 2030, including Malaysia. Despite any near-term market uncertainties, Principal suggested investors remain invested in structural sectors and stocks with the highest likelihood of long-term wealth creation within 5G, fintech, healthtech, & greentech.
“We continue to favour sustainable investing supported by carbon-neutral pledges, the United States re-joining the Paris Agreement, and substantial inflows into ESG funds and exchange traded funds.” According to the strategists at JP Morgan Asset Management, domestic laws and international commitments should continue to spur growth in sustainable investing alternatives. “Low rates and muted expected returns from traditional financial assets have led alternatives to transition from optional to essential.”
Taking charge of investing online anytime, anywhere
At Principal, we are bound by one common purpose; to foster a world where financial security is accessible by all. With more than 142 years of global expertise in investment, you can always count on Principal to be your investment partner.The enhanced Principal online investment portal makes it easy for investors to manage their investments virtually wherever and whenever they want.
With access to investment portfolios at their fingertips, investors can stay on top of the game by maximising each ringgit of their investments and tracking them in real-time. Apart from being able to manage all investments through one online platform, investors need not worry about missing an investment opportunity as they may buy, switch, redeem or view their portfolios on the go. Cash savings does not involve risks and are important for emergency purchases and rainy days. Meanwhile, stocks are chosen by investors with higher risk appetites and tolerance, as well as a longer time horizon. While identifying market trends is important, the key to success in investing with trend following is diversification.
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