Back to InsightsParamount Associates Wealth Management

2022 Global Market Outlook

Patience Will Be Necessary

2022 Macro Environment & Asset Allocation

2021 was a year of transition in global economics and market leadership. For the first time since the pandemic began, the phrase ‘price stability goals’ was added to Federal Reserve notes in January 2021. That statement changed market leadership as investors moved away from momentum stocks toward low valuation stocks.

Our approach is to invest in companies with predictable cash flows, earnings, and sales. We expect significant divergence in asset classes (growth vs value) and within different sectors. We believe firms with fixed costs will fare better than those with variable costs of goods sold.

2021 Full Year Performance Recap

Crude Oil (USO)+64.68%
S&P 500+26.89%
Nasdaq Composite+21.39%
Dow Jones Industrial+18.73%
Russell 2000+14.54%
US Treasuries-1.11%
Emerging Markets-3.62%

Scott Tremlett, CFP®, ChFC® | Managing Partner

Patience Will Be Necessary

A detailed look at global leading indicators entering 2022 across manufacturing PMIs, composite PMIs, and GDP estimates:

IndicatorSummarySignal
J.P. Morgan Global Manufacturing PMIManufacturing PMI at 15-month lowNegative ↓
IHS Global Sector PMISignals higher output in 17 out of 21 sectorsPositive ↑
IMF Global GDP ForecastProjecting 4.4% global GDP growth in 2022Positive ↑
US Leading Economic IndicatorsProject robust 3.5% year-over-year growthPositive ↑
Eurozone Composite PMIRegained momentum to strongest pace since Sept 2021Positive ↑
China Leading Economic IndicatorsHighest on recordPositive ↑
India Manufacturing PMIOutput & new orders expand as inflation softensPositive ↑

2022 Key Investment Themes

(1) US Equities > Overseas Equities

US corporate balance sheets exhibiting relative strength in margins and interest rate sensitivity.

S&P 500 vs VEU 2021 Chart

(2) Underweight EM & Europe

Headwinds in European growth momentum and select emerging markets.

International ETFs 2021 Chart

(3) High Inflation Easing

Post-pandemic supply chain reopenings gradually easing headline CPI pressure.

20 Year Inflation Rate Chart

(4) Preference for Low Valuations

Divergence between low valuation value stocks and high multiple unprofitable growth.

Low Volatility vs Unprofitable Tech Chart

Sector & Equity Exposure

Preferred Sectors:

  1. Financial Services
  2. Technology
  3. Energy
  4. Healthcare
  5. Consumer Defensive
Style Box Asset Allocation Grid

Top Equity Holdings:

Morgan Stanley
Apple Inc
AbbVie Inc
NVIDIA Corp
Schlumberger Ltd
LPL Financial
Assurant Inc
Bill.com
Pioneer Natural Resources
Broadcom Inc
Fair Isaac Corp
Coca-Cola Co
Microsoft Corp
Charles Schwab
Alphabet Inc
Group 1 Automotive
Huntsman Corp
Livent Corp
Danaher Corp
Qualcomm Inc

REFERENCES

  1. US Bureau of Labor Statistics
  2. J.P. Morgan Global Manufacturing PMI
  3. IHS Markit Sector PMIs
  4. Macrotrends Inflation Data

DISCLAIMER

The views expressed represent the opinion of Paramount Associates Wealth Management. The views are subject to change and are not intended as a forecast or guarantee of future results. Past performance is not indicative of future results.