By Sonja Laud, Legal & General Investment Management

Even though we’re only a few weeks into the new year, investors have already seen some significant moves in markets. In a special CIO call, we discussed how they might play out.

Last week I sat down with Colin Reedie, Head of Active Strategies, and Tim Drayson, Head of Economics, for a live webinar with clients to assess the investment outlook for 2022 in light of recent market and macro developments.

You can listen to an audio version via LGIM’s podcast channel on Apple, Spotify, our website and Audioboom, where the first instalment of our two-part outlook series is also available. During the call, we made the following key points.

Accelerating change

Society could be on the cusp of another ‘Roaring Twenties’, amid the global economic recovery and rapid technological change. That’s because each successive wave of COVID-19 appears to have a lower impact on economic growth, while the pandemic – which has fundamentally altered how we live, work and play – has accelerated key themes of which investors need to be aware.

We will, of course, continue to research and engage on the associated environmental, social and governance issues. This year, among other topics, our Global Research and Engagement Groups will focus on climate change, as well as inequality, cybersecurity, health and obesity.

Hear from Sonja, Tim Drayson and Colin Reedie


Inflation implications

While inflation is likely to ebb from current levels, it’s unclear whether and when it will return to target. It could remain stubbornly high, in economies at full capacity, triggering further upward pressure on wages.

Markets appear to be underestimating either how high interest rates need to go, or how stubborn inflation will be. This means 10-year US Treasury yields could rise materially, in our view.

Growing volatility

We expect greater market volatility this year, as central banks balance the risk of tightening policy too far, too fast versus the danger of being behind the curve on inflation. Indeed, a hawkish pivot is already underway at the US Federal Reserve, while we believe the Bank of England may raise rates again in February.

Disclaimer: Views in this blog do not promote, and are not directly connected to any Legal & General Investment Management (LGIM) product or service. Views are from a range of LGIM investment professionals and do not necessarily reflect the views of LGIM. For investment professionals only.