Stock Picking will be a key theme for 2022, says BlackRock CIO
- Markets continue to rise against a backdrop of uncertainty, including COVID-19 developments, global supply chain issues, and persistently high inflation. Furthermore, potential monetary policy tightening by central banks remains a key downside risk heading into the new year.
- While Nigel Bolton believes that the outlook for equities in 2022 will be more difficult, he believes that they will continue to eke out gains as long as real interest rates remain negative.
Markets still Grind Higher
LONDON: According to BlackRock‘s Nigel Bolton, stock picking will be more important for investors in 2022 than macroeconomic themes.
Markets have continued to rise against a backdrop of uncertainty, including developments on the COVID-19 front and global supply chain issues. This includes persistently high inflation and potential monetary policy tightening by central banks, which are both major downside risks heading into the new year.
Over the last 18 months, stock markets have led a broad bull run for risk assets, though the emergence of the new omicron COVID variant has recently resurfaced some volatility. While the outlook for stocks in 2022 is more challenging, Bolton believes they will continue to eke out gains as long as real interest rates remain negative.
“That is going to be the key here for, I believe, many many years to come, and that means I think you still want to have risk assets and equities in your portfolio.” “However, you must have much more realistic expectations in terms of the amount of return that you will receive over the next 12 months,” said Bolton. Bolton, a co-chief investment officer of BlackRock’s Fundamental Equity Group, declared to reporters on Thursday at the Edelman Investor Summit in London.
What does Bolton argue for?
BlackRock expects equities to provide high single-digit returns over the next 12 months, a more modest environment than the rally seen since the start of the pandemic recovery.
Bolton argued that instead of focusing on the value or recovery trade, he should favor specific sectors such as financials or energy. Investors will need to take a more nuanced approach in 2022, based on their low valuations and alignment with the economic resurgence.
“Some of the larger, more established oil companies will be able to change and may have a reasonably bright future based on valuation levels.” “They may appear optically appealing,” he said, adding that there will be “winners” and “losers” in all sectors of the market.
“That is why I believe the theme for next year will be stock picking.” I believe it will be a good market for individual stock pickers, but not so much for top-down macro theme guys.”
Supply chain disruption has been a major source of concern for businesses across the globe as resurgent demand outstrips supply recovery as economies open again. Companies with a diverse supply base and who have treated their suppliers well in recent years, according to Bolton, have a better chance of success. They have demonstrated a greater ability to keep supply chains running during difficult times.