Top Business Market to Invest in 2022
Updated: Apr 26, 2022
Across sectors, financial organizations could overcome challenges and ascend to new heights by prioritizing digital transformation and ESG initiatives, investing in talent while rethinking the workplace, and partnering in new ways to innovate and increase efficiency. It’s time for financial leaders to think beyond traditional bottom-line metrics and develop strategies that serve both business and societal needs by putting purpose and trust at the top of the agenda.
An oil supercycle, inflation-protected yield, and cheap valuations will lead to another standout year.
"We believe that commodities, and particularly energy assets, are in a supercycle driven by COVID-19 recovery, monetary debasement, geopolitical tensions and supply/demand frictions built over the past years," wrote Marko Kolanovic and Hussein Malik, JP Morgan's coheads of research, in a report detailing their 2022 outlook.
"Many may have shunned traditional energy on fears of its demise in a more ESG-centric world, yet ESG issues helped move the price up in 2021," BlackRock strategists wrote. "We would focus on areas where there is opportunity for growth, such as exploration and production companies, rather than places where growth is limited, such as service providers.
No sector is perfect, but healthcare's uncommon combination of below-market valuations, steady growth, and defensiveness makes it a choice pick in several firms' view.
Even if growth falls flat — in the healthcare sector or the broader economy — there are reasons to stick with the group. Bank of America has touted the sector's healthy yields, which offer some insulation from high inflation. And if the economy were to weaken in 2022, healthcare companies' pricing power would make the sector a defensive hideout for investors.
The best opportunities within the tech sector, in BlackRock's view, can be found in the telecommunications industry and in shares of companies that make "labor-saving" devices. Continued investment in 5G cellular networks will lead to a spending boom, and heightened wage inflation will lead companies to adopt technologies that replace employees, the firm wrote.
The Materials sector includes chemicals, construction materials, containers and packaging, metals and mining, and paper and forest products
But Bank of Montreal strategists pounded the table for materials in their 2022 outlook report, saying the group offers "strong relative value" and is "operationally strong" because of profit margins and free cash-flow generation levels that are above their historical averages.
On a relative basis versus the S&P 500, Materials return on equity is still well-below its historical average, leaving much more upside for profitability even to just return to more normalized levels compared to the overall market
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