MARKETS GET READY FOR 2022...ITS TIME FOR PREPERATION-SERIES 1

 

Well if you are thinking that this equity market will continue just like one-way traffic well you are partially correct and partially wrong.  Nifty will rise to new highs from the present levels but prior to that we have few hurdles to face and we need to prepare our minds for the upcoming opportunities and rebalancing of portfolios.  Time is coming where Active Fund Managers will be in high demand and passive fund players will be in standby mode sector rotation and selective segment movements will begin.   Global financial markets have already started focusing on the debt market and the investors are also rebalancing their equity portfolios.  For example, the Vanguard Ultra-Short Bond ETF (VUSB), which was launched in April and has already amassed $1.7 billion in assets under management.

We will find Inflation-linked debt products and Mutual funds in 2022. Yes, this space will find significant demand-supply as inflations will reach new highs.

This winter is going to be one of the expensive winters for the global economy. We are slowly approaching the end of the era of Free Liquidity Distribution as we are near the end of the calendar year of 2021. Gold will rise as safe heaven and investments into Multi-Asset products and asset allocation products will find significant inflows in this winter.

The global economy is preparing for Tapering and interest rate hike but more than this the efforts and actions of decarburization is going to cost huge. This will drive income inequality which might spill over to generations.

Lack of alternative energies and cut down on coal consumption will spook the energy cost and the same will get reflected in every item across any industry and the same lead to cut down in consumption in coming days.

Global interest rates and India rates will start rising before June 2022 and by 2023 we will see that the Debt category is roaring high.  IPO markets will slow down by June 2022 and the Unicorns will become selective.

The sharp V shape recovery is now going to change and we will witness growth slowing down across the globe in 2022. The same is applicable for India too where we will find GDP and market growths coming cooling off.

The adjusted corporate profits due to covid impact are to face the hurdle of the slowdown of consumption due to rising cost of goods and drawback of freebies provided by the developed economies.  Job creation is still a challenge for many economies and the per capita income is going to decline in 2022. The stimulus helped personal incomes soar in 2020 and early 2021 and this will drop now in 2022 hence the revenge buying and consumption horse will take a slowdown in coming years.

By the beginning of 2022, we will find GDP growth projections will be sliced across the globe and we will witness several rounds of cut down of growth in 2022.

The biggest risk to the investment world till now is the lack of alternatives next to Equities. This segment will now change in 2022 and we will witness before June 2022 the debt segment getting back in shape and asset allocation is getting back to the centre of sage.

Every investor cum fund manager are going to dry down in the coming months and financial advisors will be back in business. The quick gain theory will slow down and asset allocation basics will need to be adopted now. Reinvestment risk will wither out by June 2022.

The rising inflation will wipe out the wage gains and hence even despite having employment gaining in few countries we will still find consumption to decline.  The real sector across the globe will fall down in the coming days as the rate of interest starts rising and WFH becomes distance history.  Further inflation will spook the prices and the end-users will no longer get the gains they enjoyed in the past 18 months.

We will find sector-specific movements in returns and growth. Stock specific actions and movements will get into the game and most importantly Active Fund managers will be back in the game beating the passive funds. Well sorry to disappoint that Passive cannot be your core it was a satellite and will remain satellite only.

Portfolio rebalancing has begun and we will witness significant inflows from the passive index-based funds to active funds in the coming days. By June 2022 we will witness new papers of corporate debt and treasury papers to invest in as corporates will prefer to raise capital from the bond market rather than heading for Equity. We will find Bond ETFs coming back and quality paper baskets coming up.

The government of India should make the corporate bond and debt market more attractive for investment through leeway in taxation. This will help both investors and the government in the coming days.  Well, 2021 will be over in the next two months and we should plan for 2022 as well as 2023.