As the world learns to live with coronavirus, geopolitics are again coming to the fore. Different social and economic systems are competing for trade and natural resources in a way that goes beyond the historical rivalries of traditional regional power blocs. Geopolitical stresses may be evident in multiple ways – through financial markets (e.g. in terms of listing restrictions), through commodities (supply restrictions), through other regulations, through political summits and, ultimately, the underlying threat of military conflict. Geopolitical differences will be further complicated by environmental issues. The important and intensifying struggle against climate change, with implications for activity levels and costs, may expose new divisions within traditional blocs (e.g. India, China and other emerging markets) as well as between developed and emerging economies. All this will take place when individual economies are growing fast but remain under varying forms of economic stress. For most, offsetting the economic impact of the coronavirus has been expensive. Public finances are already under stress but the need for redistribution of resources between social groups – as economies restructure – remains at a time when public debt levels are already high, but with some divergence (Figure 1 illustrates for the Eurozone). Populations’ redistribution concerns will be expressed through a range of important elections and appointments in 2022 – for example the French presidential elections in April and the U.S. mid- terms in November. More formalised decision-making – for example China’s National People’s Congress and the likely subsequent high-level political reshuffle – will also have to acknowledge public concerns in this area.

What this means is that there will be significant sharing pains at both at an international and national level. Reconciling the different economic and political needs behind these sharing pains will be difficult – this is the big political challenge for 2022.

Geopolitical differences may be complicated by environmental issues, at a time when individual economies remain under varying forms of economic stress. Populations' redistribution concerns will be expressed via a range of important elections and appointments in 2022.

Economic recovery will continue, despite coronavirus becoming endemic in many countries. We are still forecasting, for most economies, strong growth rates in 2021 to be followed by only a slight overall moderation in 2022. (Our forecasts are given in Figure 2 below.) Generally, many economies will be running hot as high levels of stimulus continue to be applied to economies where potential growth rates remain low: such ignoring of supply conditions creates inflation and other risks.

Despite overall strong growth, this will be a subtly differentiated recovery. The relative growth trajectories of different countries will be important. As we already know, European recovery is, for the moment, lagging that in the U.S. But also consider the broader implications of slower Chinese growth. There will be a continuing process of readjustment within economies. GDP drivers will be important. When economies first started pulling out of coronavirus lows, the focus was on consumption – private and government. Investment and consumption have been sustained by a range of government plans (e.g. NextGenerationEU) but it is important to realise that these are different in scope and run on different timelines – their impact on economic growth will vary over time, as evidenced by the multiple U.S. stimulus packages over the last few years. Exports’ direct and indirect contribution to growth in many economies should be boosted by the resolution of most global supply issues by H2 2022. But note that base effects – in this era of change – will impact YoY rates. Environmental policy will also have an important impact on growth in multiple ways (e.g. through a global roll-out of CO₂ pricing). This has sometimes in the past been seen as a negative – in that it constrains certain areas of activity. But building a new green infrastructure will be a positive for many areas, including demand for commodities.

Many economies will be running hot as high levels of stimulus continue to be applied. But this will be a subtly differentiated recovery with a continuing process of readjustment within economies.

Asia is indeed at the centre of many ongoing issues – e.g. geopolitics (China/U.S./India), supply disruptions (integrated circuits from Taiwan and elsewhere) and the battle against coronavirus. The region’s centrality reflects its economic importance and continued economic dynamism. This dynamism will make for an exciting 2022 and this would be our emerging markets focus. China had a difficult 2021 and many problems remain to be resolved. Chinese growth rates are slowing (see Figure 2), new regulation has been problematic and property sector concerns have cast a shadow over both Chinese fixed income and equity markets. Many of these issues will take time to fix but we are likely to see more stable QoQ growth trends in 2022 – as we move into the new “Year of the Tiger”. The authorities will clearly want to have the economy on an even keel before Xi’s presumed accession to another presidential term late next year. We have already seen hints of a more flexible attitude by the PBoC and support from both monetary and fiscal measures might become clearer in early 2022. We could also see some eventual rowing back of regulatory measures which would be beneficial for markets – but this is something that could take some time. As is often the case, reforms intended to be positive for long-term growth may hinder growth in the short term. India has come back strongly from the coronavirus pandemic; estimated GDP growth of over 9% in 2021 is forecast to be followed by a 7.5% expansion in 2022 – comfortably above China’s expected growth. Coronavirus appears to be under control, after successive waves, and we see scope for catch-up in both corporate capex and private consumption. Inflation risks remain, but the Reserve Bank of India is expected to move slowly on tightening policy – with real rates likely to remain negative.

Misalignment of demand and supply during our current recovery from the pandemic has put pressure on many prices during 2021, with worries about deflation quickly replaced by inflation concerns – taking YoY rates of U.S. CPI above 6% and PPI inflation above 10% in many economies. Inflation is a serious problem, is already disruptive and contains a number of long-term risks – it really is the rhino in the room. One concern is that higher inflation expectations will start to be embedded in wages settlements (and benefit increases). The spectre of the 1970s – when high rates of inflation were combined with low growth and social unrest – continues to be a ghost in the machine. 2022 is likely to be a crunch year for inflation – where the problem either starts to be resolved or ratchets up a notch.

There are some reasons to be positive. Cost-push pressures are likely to moderate as global supply issues are largely resolved (by H2 2022) as the world readjusts to different patterns of production and distribution. This will be evident in, for example, reduced cost and supply pressures on integrated circuits and some users of them (e.g. cars). We are also not forecasting a further sharp increase in oil prices over a 12-month horizon. But inflation has multiple drivers. High demand for certain sorts of labour in individual economies (in part due to changes in regional supply chains) is, for example, pushing up wages. At present, on the assumption that YoY rates of inflation start to fall back during 2022, so reducing annual average inflation rates (see Figure 6), the assumption is that inflationary expectations will not become embedded in labour markets – but nothing should be taken for granted.

Inflation is a serious problem but there are some reasons to be positive if inflationary expectations do not become embedded. Cost-push pressures are likely to moderate but inflation has multiple drivers.

But we are not going back to the ultra-low inflation regime of the last decade or so. Inflation rates will remain vulnerable to further disruption as the world readjusts. Regionalisation of supply chains (so-called glocalisation, due to political concerns or simply intended to mitigate against future global fall-out) may continue to add to price pressures. And, over the longer-term, greenflation (price increases due either to environmental measures, or pressures in building the new green infrastructure) will be a significant threat. From an investor’s perspective, differentiating between these various sorts of inflation is important – as they may have varying effects on correlations between asset classes.

The prospect of higher inflation rates – for several months at least – poses yet another challenge for central banks. It could make managing this twilight world of gentle monetary tightening even more difficult. One problem is that high inflation may make central banks more reactive, and less proactive. They may start to lose control of the narrative. Rather than being able to plot and hold to a policy course out of the problem (as in 2008 and 2020), they have to react to monthly inflation changes, possibly leading market expectations to move significantly out of line with central bank expectations. Such uncertainty could open the door wider to bond vigilantes – markets determined to attack central banks’ resolve. Higher bond market volatility would ultimately have implications for equity market volatility and sentiment more broadly.

For the moment, the Fed appears to be behind the curve on rate rises – and perhaps willingly so. Average inflation targeting removes one reason for moving quickly (in that high rates of inflation can be discounted, at least initially). But deferral of rate rises may mean dealing with an even worse inflation problem in 2023. It may also make it more difficult for markets to judge the likely hawkishness of central banks – our assumption is that they will remain essentially dovish, given the uncertainties around future growth. At the time of writing (December 2021) it seems likely that the end of the Fed tapering process will be followed by a rate rise later in 2022. The overall level of ECB net asset purchases will be reduced in 2022, but a rate hike looks unlikely. The Bank of England, by contrast, may make several rate increases during the course of 2022. The Bank of Japan seems unlikely to make major changes to monetary policy in 2022. There are also some more conceptual concerns around monetary policy. There will be continuing questions – after an atypical decade and amidst continued global readjustment – about what exactly is the underlying monetary policy “normality” – in terms of business cycles and the natural rate of interest, for example. Central banks may also face a broader academic debate about monetary policy and how it relates to fiscal policy. Discussions around modern monetary theory (MMT) may increase, particularly if fiscal deficits remain at high levels. Although increases in nominal interest rates are expected to be relatively small and real interest rates very low or negative, changing real rates will still have the power to drive country and sectoral relative outperformance and underperformance – creating opportunities and risks.

Deferral of rate rises risks having to deal with an even worse inflation problem in 2023. It also makes it more difficult for markets to judge the likely hawkishness of central banks.

The world is changing, but financial repression is not going away soon. So the usual caveats apply to any fixed income assessment. Figure 8 sets out our key forecasts.

Shifting sands around fixed income – and associated volatility – further reduce the value of the asset class in balanced portfolios. There is also a risk that tapering will lead to co-movements in equity and bond prices (particularly in the U.S. and Europe), so reducing their role as a diversifier. Investors may demand a higher risk/return profile. For government bonds, we are forecasting only apparently modest increases in overall yields over a 12-month horizon. But this could still have major implications for the government bond market. But, in a sense, the journey may be as important as the destination. Our end-year forecasts for U.S. Treasuries, for example, assume some overshooting of yields during the year (as growth continues) before risk aversion (e.g. around the U.S. midterms) pushes yields down again later in the year. The shape of the yield curve will be important – both as an indication of what is going on now, and as a view of what will happen next. The yield curve reflects the preoccupations of the different sorts of buyers of different maturities – which may be contradictory. The important point remains that returns on developed government bonds are likely to be negative and the prices of these bonds will go up and down – so this is not a “risk free” investment. As in recent years, the question for investors becomes how far you are willing to move out along the risk/return curve to get return. Investment grade (IG) – both USD and EUR – looks likely to continue to benefit from strong demand from investors. In the U.S., lower gross supply and other factors should keep some technical factors supportive too. Deleveraging and continued central bank buying will support EUR IG. However, the high duration of IG investment (for example vs. HY) adds to the risks associated with rate rises. In high yield (HY), many fundamentals (e.g. very low default rates) are likely to remain supportive. But it would be unwise to overlook potential risks from higher inflation, changing central bank policy and perhaps less upbeat earnings reports. We currently forecast a slight contraction in EUR HY spreads but expect USD HY spreads to remain at around current levels. Emerging market bonds had a mixed 2021: higher commodity prices were supportive for many EM economies, IMF support was important and liquidity problems have been avoided. Macro fundamentals are however differentiated between economies, coronavirus problems continue and developments in China cast a long shadow, particularly over Asian high yield (Figure 9). Fed tightening could still cause problems, as could policy decisions in some economies. We have slightly downgraded our 12-month strategic forecasts for EM sovereigns but still expect slight spread tightening. For corporates, we think that resilient credit fundamentals, recovering EM growth and a valuation buffer will mitigate policy and rate risks – some spread tightening is expected.

The equities outlook for 2022 still looks positive – given expectations of continued good economic growth, and the likelihood that central banks will tighten only slowly (so real yields stay negative). Supply chain issues are likely to moderate and most companies have some ability to pass on inflation. And information technology continues to evolve in interesting ways – the digitalisation revolution is not over. We think that this sets the stage for single-digit earnings growth in most markets on a 12-month horizon (Figure 10). There are several reasons why equities growth will not be as strong in 2022 as in 2021. Economic growth is strong but decelerating towards potential and it is sensible to work on the assumption that valuations have now peaked. Growth in margins is likely to slow sharply and we may be looking at lower (if still historically high) forward price/earnings (P/E) multiples on a 12-month horizon.

Modest index growth on a 12-month horizon will however conceal important potential sector and geographic rotations within the course of 2022. Rates dynamics will be an important driver (as in 2021) – e.g. in terms of value vs. growth and Europe/Japan vs. the U.S. Broadly, we could see a move from cyclicals in H1 2022 to defensives in H2 2022. Rising (if still negative) real rates may increase the appeal of “short duration” stocks such as banks and cyclicals relative to “long duration” stocks very dependent on assumptions on expected earnings. Such “long duration” stocks can vary from old-style infrastructure to information technology, both established and young, unprofitable technology companies highly valued on expected earnings. Such rotations may also not be completely smooth – spikes in real rates may lead to risky and unstable rotations back and forth between markets and sectors. Equities are often noted as offering some resilience to inflation, but rising prices and costs will have different impacts in different sectors. Wages growth (the result of labour shortages in some areas due to temporary factors or more structural change) may benefit scalable digital platforms – services could be a loser. High commodities prices would benefit oil and gas and, overall, hurt manufacturing. Transportation costs would benefit shipping and logistics – and hurt firms dependent on supply chains. Pricing power may benefit IT and premium brands – but not help old consumer brands. Figure 11 illustrates historical average annual S&P 500 price returns at different levels of inflation.

Equity strategies will vary over time and between markets but a base case strategy with general validity would be a barbell approach – with “growth”/tech stocks at one end and “value”/banks at the other. At a geographical level, and despite interest rate worries, there is still a lot to be said for IT and the U.S. market. In the U.S., we are overweight consumer discretionary, financials and IT. We are constructive on U.S. small and mid-caps. In Europe, many of the signals are good. Multiples have already derated, with price/earnings ratios already back to pre-crisis levels and the region has in the past tended to outperform in periods of higher yields. Aggregate labour cost pressures also appear under control in most economies. One approach might be selective investment in structural growth IT stocks and materials and industrials (which include some cyclical recovery names). Small and mid-cap stocks also look attractive here. In Japan, the corporate sector could appear attractive. Relative valuations are good and there are hopes that domestic growth will pick up following economic reopening. Companies’ balance sheets are good and dividends remained stable during the pandemic. Set against this are low structural earnings per share (EPS) and geopolitical risks from China. Companies are also reluctant to raise prices domestically. All this may keep foreign investors cautious on Japan. Emerging markets equities had a relatively poor 2021, overshadowed by China. But, while valuations of Chinese stocks may now look attractive after recent declines, caution is still advised in the medium term – given regulation worries, slower Chinese growth, tighter credit and the problems in the real estate sector. After a difficult Q1, we would hope for some improvement later in 2022. Looking forward, we would prefer A-shares and “policy friendly” sectors such as solar, EV, semis, and industrial automation. Latin American stocks are likely to be challenged by continuing questions around inflation, fiscal policy – and a heavy political calendar, notably Brazil’s elections on October 2.

Generally, equity market reversals are likely to be short-lived and equity market bears are likely to suffer. But you need to be aware of various potential risks which could lead to bouts of volatility. The most obvious include energy supply (particularly in Europe), ripple effects from the Chinese property sector, a coronavirus resurgence, or much faster rises in rates than expected. Crypto- bursts, major tax rises in the U.S. (unlikely) or a ramping up of tech regulation could also be concerns.

There were big moves in commodity prices in 2021 as economic reopening and geopolitical pressures played out. Oil and gas prices were amongst the most visible. Commodity price volatility may decline in 2022, as economic reopening pressures moderate, but this will not be a stable situation and upward pressures will continue. It is possible to speculate about a new commodities super-cycle. For oil, we should see limited additional output from OPEC+, particularly in 2022 H2, and production from some members (e.g. Iran) could increase more markedly. U.S. producers are however likely to remain disciplined, driven by corporate finance preferences – meaning that a return to easy supply conditions is unlikely. Given the likelihood of continued strong demand for oil, this means that oil prices may stay around current levels – we forecast a WTI price (12-month forwards) of USD70/b at end-December 2022. In a broader context, redistributional policies seem likely to bolster overall demand for commodities. It is also worth noting the “green antithesis” – the likelihood that building a new green infrastructure will initially be energy intensive in terms of exploration/building and will also boost demand for industrial commodities such as copper and lithium. ESG pressures and the resulting financial discipline (i.e. restrictions) in energy investments may also provide a an upward boost to oil and other prices. An evolving global CO₂ market will also encourage reevaluation of projects.

Commodity price volatility may decline in 2022 but this will not be a stable situation and upward pressures will continue. The "green antithesis" could also initially boost demand for energy and some industrial commodities.

As always, precious metals need to be treated rather differently. Gold is historically problematic in periods of rising interest rates and had a rather mixed 2021. (It was notable how higher inflation did not translate into higher gold prices, with gold perhaps no longer the obvious safe-haven for some investors.) Despite still high inflation, gold seems unlikely to have a good 2022: we forecast a price of USD1,750/oz at end-December 2022.

2021 was a boom year for real estate in many markets. Many of the fundamental drivers remain in terms of demand and low financing costs will continue to apply. “Cap” rates (essentially, the ratio between the income on a property and the property’s value) are low but interest rates are lower. However, there are large variations across geographies and real estate sectors, and there are appreciable risks. In the U.S., logistics and residential have been the top performing areas recently. Unsurprisingly, offices have been slower to recover than in previous upturns but there are not many signs of distress. Elsewhere, logistics has a been a good performer although retail remains challenged. Listed real estate showed strong growth in the U.S. in the first three quarters of 2021 but much more muted growth in Europe ex-UK.

Demographics and growing tech sectors are a factor behind demand. But supply is also an issue. Inflation in building materials costs (up around 30% YoY in the U.S.) and other costs (e.g. labour) may be putting a brake on supply (so supporting prices, everything else being equal).

In 2021, we saw a shift from major currency pairs being driven by general risk on/risk off sentiment to being driven by fundamentals. Late in the year, worries about U.S. inflation – and the possible consequences of it through bringing forward Fed rate rises – helped drive EUR/USD down and took DXY (the overall dollar value index) to new highs. What happens in 2022? Relative interest rates are not the only factor and other fundamentals could work against the USD. The growth differential between the U.S. and Europe (and the rest of the G10) may decline slightly in 2022 (although remaining high) – implying less capital flow into the U.S. Strong global growth may also lead to flows into economies that show most catch- up potential (i.e. have the strongest “growth beta”). If these economies manage to close output gaps more quickly, interest rate differentials will be eroded. Many valuation measures (e.g. NEER, REER, OECD-PPP and GDP per capita-adjusted PPP) also suggest that the USD is overvalued, and investors’ big long positions in the currency could be run down.

All this will take time to have an impact, and we think that USD strength could be maintained into the first half of 2022. But later in the year, we think that the EUR will strengthen, taking EUR vs. USD to 1.20 by end-December 2022. Our currency forecasts are summarised in Figure 17. In general, despite a slight strengthening of EUR vs. USD, JPY vs. USD looks likely to be broadly stable compared to late 2021 levels. Strong commodity prices are likely to support the AUD, NZD, CAD and NOK although most of their rise may now be behind us.

Most emerging market currencies may see a slight deterioration in 2022, but some will experience sharper declines due to idiosyncratic events or policy errors. In 2021, many EM currencies were supported by high commodity prices and central bank rate hikes (e.g. RUB, MXN and BRL). With the U.S. now starting to tighten, these currencies may start to lose some advantage over the next 3-6 months. But further rate rises by some emerging central banks will offer support and the effects of slower Chinese growth are likely to be offset by a strong current account, relatively low Chinese consumer price inflation and stable PBoC policy, helping brake a slight decline in the CNY. And the availability of carry will, of course, offer continued support for emerging market currencies as a whole.

Fundamentals will be important for FX in 2022 but interest rate differentials will not be the only factor. Expect some fundamentals to start to work against the USD in 2022.

Portfolios need to be built on the assumption that while some interest rates are set to increase, we are not going back to a “normal” situation. Developed market government bonds are not “risk free” and most corporate bonds will offer low rates of returns. Moreover, changed correlations between asset classes mean that traditional portfolios (e.g. a 60/40 equities/bonds split) cannot be relied on to provide protection in the event of a market reversal. At a more granular level, those not taking an ESG approach should also be aware that environmental legislation creates the risk of “stranded assets” – e.g. sectors, firms and operations where asset values decline sharply due to operational restrictions or the switch to newer, greener technology.

• 01

  Intra-asset class strategies. Within asset classes, consider carefully how to invest. For example, within equities one approach might be a barbell strategy overweighting both growth stocks with attractive earnings potential and cyclical companies with attractive earnings recovery potential and solid balance sheets. You could also focus on companies with higher pricing power (i.e. ability to adjust prices of their output in response to changes in inflation).

• 02

  ESG strategies. Consider adopting an ESG approach – which can come in a number of different forms. This may help provide a better risk/return combination (and guard against stranded assets) as well as creating beneficial outcomes.

• 03

  Alternative investments. For some investors, particularly those with a longer time- horizon, alternative investments (e.g. private equity, venture capital, real estate) may be a way to access higher returns, which are also likely to be less correlated with conventional asset class moves. But be aware of illiquidity and risk issues surrounding such investments.

• 04

  Add further risk controls. Multi-asset portfolios may still benefit from additional risk overlays and other approaches (e.g. Risk Return Engineering).

Although some interest rates will increase, we are not going back to a normal situation. ESG strategies, alternative investments and further risk controls will all have a role to play in portfolios in 2022.

A consistent and well thought-through investment approach will continue to be beneficial. One component of this approach may be investments in key long-term themes, as we discuss below.

Overall portfolio management can be complemented by investing in key investment themes. These are designed to have long-term relevance and to identify continuing investment opportunities – well beyond 2022. We have been developing our key investment themes for over five years. They can be visualised as sitting within what we call the TEDS triangle – bounded by the three dimensions of technology, demographics and sustaining the world we live in. Environmental, social and governance (ESG) investing has become increasingly central to the investment universe. One of the ten investment themes below is ESG and we highlight four interesting long-term ESG sub-themes. In reality, of course, ESG considerations permeate all of the themes below, including those with a clear technology or demographics focus. COP26 in Glasgow in November highlighted how ESG is now defining economic reality, in terms of how we live and how companies and governments will respond to environmental challenges. The immediate focus may be on the “E” (environmental), but this will imply major changes for the “S” (social) and “G” (governance) components too. Environmental pressures will be accompanied by social and governance pressures as economies and sectors restructure to address multiple dimensions of change.

Global temperature worries will be accompanied by biodiversity concerns: COP26 was just part of a long process. Progress on taxonomy and standards is likely and will be increasingly expected and required by investors: “greenwashing” concerns will help investment transparency and performance reviews. Focus may shift to positive contribution approaches and comprehensive impact assessments. Growing awareness of impact of green transition on increasing inflation levels. Financial innovations will continue, with global green bond issuance of USD400-500bn in 2021, nearly double the 2020 level.

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  ESG Blue Economy

  Continued ocean degradation through climate change and pollution means that a shift to more sustainability is increasingly necessary, particularly in rapidly expanding ocean sectors. The United Nations Sustainable Blue Finance Initiative and EIB Blue Sustainable Ocean Strategy have been launched. “Blue Economy” investment initiatives include funds and bonds for marine conservation but there will be continued calls for better investment criteria, taxonomies and stakeholder networks. Public-private partnerships may be important to address projects with uncertain returns.

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  ESG Hydrogen

  Environmental concerns and commitments will maintain focus on developing hydrogen sources. "Green" hydrogen remains a potential way to decarbonise parts of the economy that cannot be reached by electrification alone (e.g. chemical and steel production) but this remains a long-term hope/solution. It is unlikely to become economically viable for several years, even though costs of electrolysers and renewable energy sources used to produce hydrogen are declining. Short-term progress is likely to remain uncertain, despite national strategic commitments.

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  ESG Resource Stewardship

  The pandemic added to global waste, and not just through medical equipment disposal. Packaging use also increased while recycling plants stopped running in emerging economies. Climate change and the global waste problem are intertwined, so awareness of governments, companies and individuals will increase. Government efforts need to focus more on real impact, not media- friendly quick fixes. Developed world policy may need major improvement (e.g. EU approach to residual waste) and large investments in technology are needed, with implications for investors.

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  ESG Water

  Continued population growth, urbanisation and higher living standards in emerging markets will increase demand and opportunities across the entire water sector (recycling, desalination, industry, agriculture etc.) often via public/ private partnerships. Earmarking of USD55bn for water investments in U.S. infrastructure plans and EU members’ water plans will get assistance via the NextGenerationEU package. Prospect of rising interest rates could weigh on defensive sectors (e.g. utilities) and fiscal pressures could slow disbursements of water infrastructure public funds.

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  Artificial intelligence (AI)

  AI is likely to grow in importance. The AI theme has shown adaptability to changing societal needs and is an enabler of other technologies (e.g. in the field of digital business). Concerns centred on implications of AI “success” not “failure” (e.g. worries about employment implications, mass surveillance). AI could provide opportunities for emerging markets to leapfrog developed markets in some areas. In the immediate future, AI development will potentially be hindered by the ongoing lack of semiconductors/chips, but acceleration of AI in healthcare is expected to continue. Machine learning (ML) likely to remain main direction of AI funding.

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  Cyber security

  There is a continuing need for improved cybersecurity – for example, to protect critical infrastructure, increasingly sophisticated connected mobility systems and more digitalised healthcare systems. Growing retail e-commerce sector, inter alia, is likely to need more security, and there is an increasing interest in use of artificial intelligence to improve security systems. Home working may have increased risks. Surveys show data breaches are at a new high, with healthcare badly affected.

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  Healthcare and MedTech

  Ageing populations and increasing incidence of infectious and chronic diseases, as well as the pandemic, are maintaining pressure on healthcare and disease prevention systems. Medical devices are increasingly used for home-based diagnoses and treatment and growth here is expected to continue. Digitalisation, robotics and remote technologies add to options for delivering healthcare. COVID-19 related supply disruptions could however continue to lead to short- term dislocation.

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  Industry X.0 (including 5G)

  Further advances around artificial intelligence (AI), 3D printing and robotics are moving us towards Industry X.0. 5G rollout will continue to increase device connectivity, raise prospect of flexible manufacturing across multiple locations and lead to additional applications. Supply chain pressures (especially for semiconductors) are expected to ease markedly in H2 2022 but other pressures for industrial restructuring will continue, as firms use digitalisation and automation to meet strong recovery demand.

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  Infrastructure

  Infrastructure is increasingly recognized as the thread that connects multiple issues, with a need to update traditional infrastructure as well as upgrade contemporary systems (e.g. via data centres, fibre networks, telecom towers, smart grids). Much pandemic recovery spending focused on physical, digital and green infrastructure with hopes this could help address climate change and other worries. Public/private partnerships are likely to be in focus around larger projects in the EU and the U.S.

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  Millennials and Generation Z

  Millennials and Generation Z remain important in terms of population and political power, despite so strategies focused on millennials’ consumption patterns (e.g. technology, entertainment) should benefit in the long term. But many millennials-relevant stocks remain vulnerable to anticipation of interest rate rises. Large-cap tech stocks also could be liable to increased regulation given market position fears. Fiscal stresses could increase millennials’ taxes and other payments, limiting spending.

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  Smart Mobility

  Growing interest in smart mobility and technology angles of 5G, AI and cybersecurity. Climate concerns continue to drive car electrification, but risks remain around development and regulation. Charging infrastructure is both an opportunity and a risk. Higher oil prices and lower battery prices encourage electric car adoption (but note also increase in electricity prices). Advances likely on connectivity (5G), autonomous driver solutions (AI) and shared mobility. Sector is not immune to global supply chain difficulties (e.g. around integrated circuits).