Forward Thinking: 2022 - Knowledge Leaders Capital

Forward Thinking: 2022

January 06, 2022

By Steven Vannelli, CFA in Economy, Knowledge Leaders, Markets, Portfolio Management

In this quarter’s strategy report, Forward Thinking 2022, we discuss the following:

-US economic growth is expected to be quite robust in 2022, despite the disruptions from the Omicron variant. Capital spending is expected to lead economic growth, which makes sense as companies invest in their (now in retrospect fragile) supply chains. Onshoring, near-shoring, etc. is likely a theme for US companies in 2022.

-While the Federal Reserve is expected to begin raising interest rates in 2022, the market seems to see a fairly short tightening cycle, with the terminal rate falling short of Fed expectations. Should a lower terminal rate come to pass, we expect this will be very supportive of equity valuations. With that said, we think technology may be repeating its peak and decline of 21 years ago. The technology sector’s relative EPS expectations have flattened out, as has tech’s relative performance.

-Japan is the only major economy expecting an acceleration in GDP growth in 2022, led by consumer spending. Inflation isn’t a problem, and earnings estimates forward 12 months continue to march higher. Japan was technically the weakest country in 2021 in the developed markets according to our internal calculations. We think the catalysts are in place for a better 2022 relative performance.

-We conclude with a group of spotlights on innovative companies around the world.

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The information presented here is for informational purposes only and is not to be construed as an offer to sell, or the solicitation of an offer to buy, securities. Some investments are not suitable for all investors, and there can be no assurance that any investment strategy will be successful. Hyperlinks may be included in this message that provide direct access to other internet resources, including web sites. While we believe these links are to reliable sources, Knowledge Leaders Capital (“KLC”) has no control over the accuracy or content of information contained on these sites. Although we make every effort to ensure such links are accurate, up to date and relevant, we have no control over pages maintained by external providers. The views expressed by these external providers on their own web pages or on external sites they link to are not necessarily those of Knowledge Leaders Capital.

The information provided on this blog is for illustrative or example purposes only and should not be construed as KLC’s opinion or investment outlook. As of the most recent quarter end, the named companies may have been held by KLC. For full information including additional policies and full disclosures, please visit our website: KnowledgeLeadersCapital.com.

Any reference to Index performance does not represent the performance of any investment product offered by Knowledge Leaders Capital, LLC. An investor cannot invest directly in an index. The performance of client account may vary from the Index performance. Index returns shown are not reflective of actual investor performance nor do they reflect fees and expenses applicable to investing.

Companies are selected for “Spotlights” based on high levels of innovation activities in their respective industries and illustrate innovation being employed across all sectors and geographies. Spotlight selection is separate from stock selection by the investment team. Spotlights are not necessarily representative of investment opportunities and can be selected regardless of investment performance or inclusion as a KLC holding.