INSUBCONTINENT EXCLUSIVE:
Worries over the Covid-19's omicron variant have sent ripples through world stock indexes.New Delhi: A year ago, the average stock
strategist may not have seen that the world's best-performing index in 2021 would be Mongolia, or that a movie theater chain would rise
13-fold.And while many were bullish, few predicted the sheer ferocity of the rally that pushed European and United States stocks to
successive records, or the dip after the emergence of the omicron variant of Covid-19
Even fewer had forecast the slump in China or the liquidity crisis affecting the nation's developers.In short, it was a year of surprises
-- that was the least surprising thing about it
Getting the details right in 2022 will be no easier -- but a few broad themes are likely to persist.Covid-19Pandemic developments have been
the market's main driver for almost two years, causing a crash in 2020 and then a sustained rally on the back of vaccination programs that
allowed an economic reopening
And now worries over the omicron variant have sent ripples through world stock indexes.Most strategists expect the virus to become a
sidenote next year, as the advent of anti-viral pills from Pfizer Inc
add to humanity's arsenal against the deadly infection
This majority view hasn't changed in the face of warnings that the new strain may not respond to existing treatments.Still, if there's one
thing the pandemic has taught us it's that equity strategy is one thing, and epidemiology is another
were to disappear from our lives, that would likely still define stock market direction, as there would be no further grounds for fiscal and
monetary stimulus -- two of the main drivers of this year's exuberance.InflationMarkets looked through surging prices this year, and for
good reason, as soaring corporate earnings proved that companies can pass on higher costs to a consumer that remains willing to spend.If
inflationary pressures ease in coming months, don't expect a relief rally, as that's what stocks have priced in
strategists Dominic Wilson and Vickie Chang wrote in a note.Should price pressures persist, or even intensify, things could get tricky
Stocks are only a good hedge against inflation up to a certain point, which Oddo BHF, WallachBeth Capital and Lombard Odier put at 3% to 5%
Sustained price growth beyond 4% would erode profit and harm stocks, according to Florian Ielpo, head of macro and multi asset at Lombard
Odier.High inflation would also pressure central banks to tighten policy, thus raising borrowing costs for highly indebted countries, such
as Italy, and draining market liquidity
Federal Reserve chief Jerome Powell drew first blood this past week, warning about the possibility of faster tapering of asset
purchases.Morgan Stanley's Graham Secker says the impact of the European Central Bank's possible tapering on peripheral European debt is
among the biggest downside risks next year, while JPMorgan Chase - Co
strategists singled a hawkish turn by central banks as the key downside to their bullish outlook.DecarbonizationOne reason that inflation
may stay structurally higher is the transition to climate neutrality, a goal toward which the world's biggest economies -- from the United
States to India -- collectively committed this year
Higher carbon prices and environmental taxes increase production costs for industrials, while under-investment in fossil fuels has
contributed to a spike in energy costs that threatens to dampen growth and disrupt output.On the flip side, asset managers from BlackRock
to Nuveen say decarbonization creates unprecedented investment opportunities
One needs look no further than electric cars for examples: Tesla Inc
stock has risen more than 1,000% since the start of last year, while Rivian Automotive Inc.'s market value briefly soared to more than
$100 billion after last month's trading debut, even though its sales are essentially non-existent.With the Green party now in government
in Europe's biggest economy, decarbonization stocks may get a boost after declines this year for the likes of Siemens Gamesa Renewable
Energy SA and Vestas Wind Systems A/S.The MetaverseFacebook's rebranding drew attention to a growing space of economic activity outside
the physical world, from social media to gaming platforms
and video-game company Roblox Corp
are just two of the stocks to have surged briefly after Mark Zuckerberg rebranded the company he co-founded as Meta Platforms Inc.The
metaverse -- digital worlds where users can socialize, play games and conduct business -- is a multi-trillion dollar opportunity, according
Chief Executive Officer Tim Sweeney.Already, a digital model of a Gucci bag, which can only be used in a gaming platform universe, can cost
more than the physical version
That's because people in the developed world now spend more time online than interacting in physical spaces, according to Morgan Stanley
While the move accelerated with stay-at-home orders during the pandemic, it is projected to continue in the years ahead, and may take off
joins the party.ChinaBeijing rolled out swingeing measures to curb the profits of technology giants and tutoring firms this year, and
imposed restrictions on lending to real estate developers to cut its dependence on the sector
At the same time, soaring factory-gate prices made it hard for companies to maintain profit margins, while the lack of any significant
easing measures by the country's central bank in recent months has taken a toll on economic growth.Offshore Chinese stocks in Hong Kong
are among the world's worst performers this year, while the Nasdaq Golden Dragon China Index is down more than 50% from its February peak
The MSCI China Index is near the lowest versus global stocks since 2006.Still, many global institutions are turning more constructive on
Chinese stocks.BlackRock sees the peak of regulation having passed and expects more pro-economy measures to start having an impact in the
new year, while BNP Paribas predicts Beijing will adjust its policies toward real estate developers and supporting the private sector at a
And UBS Group AG says tighter regulations have been priced in, while corporate earnings and valuations are set to improve.And There's More
...Staying on top of these themes won't necessarily guarantee meaningful returns for investors
Potential black or white swan events are lurking everywhere: from the United States midterm elections to the French presidential vote, and
from tensions in Taiwan to a full-blown crisis in Turkey's economy following the plunge of the lira
Supply chain bottlenecks will continue to be closely watched, while global warming is another wildcard that traders may need to
consider.It's therefore no surprise that there's no consensus among the world's most prominent strategists about the direction of
equity markets: while HSBC Holdings Plc's Max Kettner advises investors to start pulling the plug on stocks in the first half of next
year, and sees things brightening up in the second half, UBS Global Wealth Management predicts exactly the opposite -- a good start followed
by a deteriorating outlook in the back end of the year.While Goldman Sachs sees markets grinding higher next year, Bank of America Corp
takes a rather apocalyptic view, predicting low or negative, and in any case volatile returns in 2022.And if we learned anything from 2021,
it is that focusing on the fundamentals of companies you invest isn't always the most rewarding strategy
By ignoring such principals, some retail investors made serious money last year, with AMC Entertainment Holdings up about 1,200%, and
returning more than 800% for no apparent reason than a social-media fueled craze.Going forward, Goldman Sachs advises investors be
selective, avoiding firms with high labor costs and stocks valued entirely on long-term growth expectations
But then again, that's just what strategists advised last year.
