Jens Peers

Mirova US

Hervé Guez

CIO Equity & Fixed Income

2022 looks like it will be another positive but volatile year. While the global economy is expected to continue its recovery, many uncertainties remain the same. Covid, inflation and supply chain issues, central bank action, and geopolitical issues, are expected to be the main drivers for markets. We do expect many of those issues to ease in the second half of the year. Covid vaccination rates and the development of vaccines that are more effective against the new variants should allow economies to fully reopen. This in turn may ease the pressure on inflation and supply chains more generally.

In this context, we find Equities more attractive than Bonds. Cyclical sectors are expected to outperform in both Equities and Fixed Income. Within Fixed Income, we prefer High Yield1 over Investment Grade2 and subordinated Debt3. The expected infrastructure investment plans, combined with the COP 264 commitments to achieve a net zero carbon economy in many of the largest countries in the world, should also lead to an acceleration of growth in the primary green bond market. For Equities, we see the best opportunities in banks, cyclicals exposed to the large infrastructure driven recovery plans, including green infrastructure and renewable energy, e-retail and fin-tech, electric cars and health care. Given the valuation differences, we expect Europe to outperform the US markets and also find more opportunities in Emerging Markets. Given the expected high volatility and continued high risks to a quick but sustained economic recovery, we remain prudent, and prefer companies with high quality characteristics such as relatively low levels of debt, pricing power and high visibility on recurring revenue streams.
1 High Yield bonds refer to bonds with an agency rating lessthan or equal to BB+. High Yield bonds tend to have a higher default risk and a higher yield than Investment Grade bonds.
2 Investment Grade bonds refer to bonds with an agency rating between AAA et BBB-.
3 Debt which is paid back after other debts are paid back. In case of unsolvability, creditors who own subordinated debt will not be paid out until after senior bondholders are paid in full.

* References to a ranking, award or label do not prejudge the future performance of the fund/fund or the manager

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Non-contractual document, issued in January 2022.

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