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Strong investment year tipped but it could be wild

Wilsons has tipped a return of under 10 per cent from equities next year, but investors might be in for a volatile ride with a key risk being a return of Covid lockdowns.

Dec 23, 2021, updated Dec 23, 2021
The intelliHR board has dropped its support for Humanforce (AAP Image/Joel Carrett)

The intelliHR board has dropped its support for Humanforce (AAP Image/Joel Carrett)

In its forecast the broker said its central case was for a “high single total return from equities’’ over 2022 as its central case.

It said the three key themes for 2022 were a recovery in corporate earnings, inflation risk management and bouts of equity volatility.

“It is hard to get too bearish around the domestic economic backdrop for 2022 as the economy continues to chase down a more normal setting. Strong vaccine coverage should underwrite the domestic recovery in 2022,’’ it said in its forecast report.

“For equities, the prospects of a mid-cycle slow down and debate around how long good times can last are expected to dominate investor debate in 2022. 

“This is particularly the case offshore, where the brakes on monetary policy are likely to be gently applied over 2022.

“We would not be surprised to see bouts of market volatility through 2022, where markets are down 5-15 per cent, before recovering. We saw similar experiences in both 2013 and 2018.

“The most significant risks to the Australian outlook will likely stem from offshore events.’’ The key risks in Australian equities in 2022 were a fall in optimism for earnings and Covid lockdowns.

There was also the prospect of a minority government following the federal election.

It said its Wilsons Australian Equity Focus List remained overweight in cyclicals and Covid recovery beneficiaries like BHP, IAG, Qantas, Santos and News Corporation.

“We are underweight domestic banks on concerns around slowing growth, particularly as cost bases remain a challenge for the banks to structurally lower. Challenger bank Judo Bank remains our largest active bank position. 

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“We remain overweight quality growth beneficiaries, which in this cycle also retains cyclical exposure as we recover from Covid-19.’’

Morgans’ December best ideas report  has included Technology One, Namoi Cotton, HealthCo REIT and People Infrastructure.

Bell Potter’s tips included ANZ and NAB as the preferred banking stocks. Among the favoured listed investment companies were Qualitas, Future Generation and WAM Alternative Assets.

In technology Bell Potter tips Accent Group, Technology One and Life 360.

In discretionary retail and professional services it favours Accent Group, City Chic and Propel Funerals.

 

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