Crossroads – UniCredit Monthly Outlook February 2022

Clients

Tuesday 22 February 2022

The beginning of 2022 has been extremely volatile. At the same time, the performance of various segments has already highlighted the main drivers and potential risk factors for the year ahead. Let’s explore in this article our Group Investment Strategy experts’ view.

2:00 min

The rapid spread of Omicron worldwide, a noticeable slowdown in the growth momentum, the earlier and more aggressive tightening of monetary policy and the escalating of the Russia-Ukraine conflict – these are the issues impacting economy and markets at the beginning of 2022.

 

Following the strong performance of stock markets last year, they were weak overall in the first month of the new year, going down 5% at the end of January, a performance which materialised against a background of rising long-term interest rates.

 

The economic recovery after the Covid shock is progressing. On one hand, this is likely to lead to longer-lasting high inflation rates, which the central banks intend to counter by tightening their monetary policies. On the other hand, economic growth in 2022 is not expected to be as high as in the previous year, but still well above the pre-pandemic trend path.

 

This above-average growth momentum should continue into next year. Increasingly, sectors that fell behind during the Covid crisis are also likely to benefit from such recovery. The key question arising from the tightening of monetary policy conditions is therefore not whether to hold equities in the portfolio, but which ones.

 

Overall, we remain optimistic. The impact of the pandemic is waning, and a further normalisation of social life is imminent. The European economy will grow perceptibly, inflationary pressures will gradually ease, and monetary policy environment conditions will tighten – and more markedly in the US than in Europe. But yields will also rise in this country. However, as this will take place in the context of a progressive economic recovery, this rise in yields should not jeopardise the economy.

 

To explore all these trends, we invite you to read the February edition of our Monthly Outlook [LINK], entitled "Crossroads", in which UniCredit Group Investment Strategy experts provide an overview of the health of global economies, their growth prospects and UniCredit's subsequent investment strategies.