Trends to follow in 2022 (& the ETF’s to play them)
As the end of the year approaches, it’s an opportune time to take stock of the drivers of strong returns and the likelihood of them being sustained.
Over the past 12 months, a significant amount of money has flowed into Australia’s ETF industry. According to ASX and Chi-X data, the market cap of the industry has swelled to nearly 44% to $132.8 billion by the end of November.
Source: BetaShares Australian ETF Review November 2021
Justin Arzadon of BetaShares believes the most underestimated thematic that could play out in 2022 is the digital assets space, but not in cryptocurrencies. Instead, he suggests it’s the companies that service this ecosystem and allow these cryptocurrencies and other digital assets to enter the mainstream that could benefit. Arzadon points to the BetaShares Crypto Innovators ETF (ASX: CRYP), which tracks the Bitwise Crypto Innovators Index (before fees and expenses), developed by Bitwise, one of the largest global crypto-asset managers.
Ian Boater of Vanguard believes that ESG is a trend likely to grow (and endure) well into the future, with products designed with a sustainable investment objective in mind recently receiving significant attention from both retail and institutional investors. However, before investing in this trend, Boater recommends investors first school themselves on the different ESG strategies that underpin these products, as no two strategies are created equal. The most common of these include: portfolio screening, impact investing, ESG integration and active ownership.
Jonathan Shead of State Street Global Advisors suggests that while equity markets performed strongly in 2021, he believes the coming year paints a complex picture as uncertainty grows around the global recovery.
“We don’t think the opportunities are consistent across global equity markets, which leads us to three possible themes to pursue in 2022.”
- Quality will surpass growth as inflationary pressures rise.
- We are likely to see increased volatility over the coming 12 months and believes that low volatility exposures “make sense” against this backdrop.
- “We expect equity markets to rise and fall in response to the ebb and flow of the global pandemic. We expect volatility in response to policy signalling from central banks as they try to manage inflation without crushing the recovery.”
To the end of November, the Australian share market has delivered 14 per cent, the US 25 per cent and even Europe rose 14 per cent. The only real stragglers have been emerging markets, which have struggled under the deadweight of a Chinese market coming to terms with new regulator concerns, returning 8 per cent.
Much of the government pandemic stimulus pay checks entered the economy and inevitably found its way into company revenues. Australian companies reported close to record earnings growth of more than 26 per cent for the 2021 financial year and paid out a record total of $67 billion in dividends. Incredibly, the $1.25 trillion invested in equities funds between January and November this year is more than the total amount over the same period for the previous 19 years combined.
Although the RBA abandoned its quantitative easing policy, it has retained a record low cash rate of 0.1 per cent and insists it’s not even close to raising it. So, between the biggest peacetime government spending program and the lowest cash rates in history, perhaps it’s not surprising share markets have done very well this year – until you throw in that it’s happened during the worst global pandemic in a century. It makes you wonder what 2022 has in store.
References
[1] Livewire Markets
[2] Australian Financial Review
xcvgv
This document has been provided to you for your general information and does not take into account your objectives, financial situation and needs and must not be relied upon by you as personal financial product advice that has been provided to you by iInvest. If you require advice regarding any aspect of the information and statements of opinion set out in this document, particularly as to whether you should base an investment decision upon the information or statements of opinion set out in this document, please contact your financial adviser.
Distribution
The material contained in this communication is prepared for the exclusive use of clients of iInvest. iInvest is an Authorised Representative (#431611) of Zodiac Securities Pty Ltd (ABN 76142982554) (AFSL #398350).
The information contained herein is confidential and may be legally privileged. If you are not the intended recipient, confidentiality is not lost nor privilege waived by your receipt of it. Please delete and destroy all copies. You should not use, copy, disclose or distribute this information without the express written authority of iInvest.
Disclaimer & Disclosure
iInvest, its related companies, officers, employees and agents may have a relevant interest in some of the securities mentioned but those holdings are not material unless disclosed in this communication. These holdings (or absence of holdings) may change at any time after publication of this communication, without notice.
iInvest, its related companies, officers, employees and agents may earn income, fees, brokerage or commissions or other benefits as a result of recommendations, dealing or transactions in the securities mentioned in this communication. These interests do not influence iInvest in giving the general advice contained in this communication. iInvest, its related companies, officers, employees and agents may trade in financial products which is contrary to the recommendations given in this communication.
You should not act on any recommendation made in this document without first consulting your investment adviser in order to ascertain whether the recommendation (if any) is appropriate, having regard to your investment objectives, financial situation and particular needs. Nothing in this communication shall be construed as a solicitation to buy or sell a financial product, or to engage in or refrain from engaging in any transaction. We cannot guarantee that the integrity of this communication has been maintained, is free from errors, omissions, misstatements, virus interception or interference.
Copyright © iInvest Trading & Advisory, All rights reserved.
