Is 2022 the year the global economy returns to more normal growth? It certainly looks that way as the world begins to dial back two years of dramatic fiscal and monetary policy actions. Here in Canada, for example, expectations are in place for 4.25% growth in the economy in 2022 as Canadian exports, consumption, and business investment continue to rebound[1].

Digging deeper into what this means for Canadian pension portfolios, Invesco’s 2022 Investment Outlook outlines the key themes we see dominating in the year ahead, including the spectre of inflation, continued uncertainty related to the COVID-19 pandemic, and the withdrawal of historic levels of stimulus as policymakers seek to raise interest rates.

Here are some of our main takeaways:

  • Reduced risk posture – We now have a slight overweighting in equities and a tilt towards defensive sectors. Watch out for higher volatility and a greater convergence in returns across asset classes.
  • Equities now favour emerging markets – A cyclical divergence in the global economy has us emphasizing U.S. quality and large cap stocks. That is based on expectations for slowing growth and stable or lower yields for long-term bonds.
  • Focus on fixed income duration – The shift in monetary policy in the coming months will likely lead to higher rates on intermediate-to-lower maturity bonds and lower yields at the long end of the curve.
  • Net Zero is key to alpha – The global need for carbon reducing technology is significant. This represents an unprecedented opportunity to generate alpha by investing in the innovative strategies that support the transition to a net zero economy.

Read the entire report now and find out how 2022 might impact your portfolio.

[1] Source: Bank of Canada, “Bank of Canada maintains policy rate and forward guidance, ends quantitative easing,” Oct. 27, 2021