#Market Strategy — 07.01.2022

What prospects for 2022?

by Xavier Timmermans, Investment Strategist, BNP Paribas Fortis

First of all, we wish you a very Happy New Year, on a personal and investment level.


  • A positive performance in 2021
  • Three main sources of concern
  • Omicron
  • Inflation
  • China
  • Outlook for 2022



Following the double-digit returns on global markets for the third consecutive year, what can we expect from stock markets in 2022?

Objectifs de développement durable

A positive performance in 2021

Global stock markets ended 2021 with double-digit gains for the third consecutive year.

In the wake of the first pandemic shock, monetary and fiscal stimuli immensely facilitated the recovery of economies.  These favourable conditions contributed to a strong rebound in company earnings after the losses reported in 2020.  In 2021, the MSCI World All Countries Index was up 20% in USD versus 14% in 2020 and 25% in 2019.

December ended on a relatively positive note, despite soaring inflation, prospects of a withdrawal of central bank stimulus measures and the staggering speed at which the Omicron variant was spreading.

In sharp contrast to these good performances, Hong Kong's Hang Seng Index fell 14% in 2021, penalised by Chinese tech stocks, with the Hang Seng Tech Index plummeting 48% from its February peak. Indeed the index suffered particularly from regulatory repression of the Chinese authorities and the threat of US delisting, which mainly hurt Chinese giants in the internet, technology and education sectors.

In 2021, Emerging Markets shed 5% in USD.

Commodities rose even more spectacularly than equities in 2021: +50% for the barrel of Brent and +33% for the Bloomberg Base Metals Spot Price Commodity Index (in dollars).


Three main sources of concern

Since the end of November, investors have grappled with three main sources of concern: the human/economic impact of the Omicron variant, inflation plus the central banks’ response, and the real estate situation in China.

Despite these ongoing concerns, the correction at the beginning of December was cancelled out in the last few days of the year. How can we explain this resilience?


The rapid spread of the Omicron variant remains a concern, as more restrictive health measures are put in place in a bid to prevent hospital saturation. That said, we believe that even in the worst-case scenario, medical progress should help to reduce the toll on lives and on the economy.

Potentially, we might have some very good news within two or three weeks if what we are seeing in South Africa and Scotland is confirmed, namely that this variant is less lethal, it is replacing more dangerous strains and is leading to herd immunity. 



In the US, inflation has reached 6.8%, its highest level in 40 years. This is becoming a political problem. Nearly 40% of Americans do not own a property and have little or no stock market savings. Inflation is directly taking a bite out of their purchasing power. But the mid-term elections will take place in November and the Democrats risk losing their short majority.

Political pressure on the US Federal Reserve to curb inflation will therefore be significant. Good stock market performance is no longer a priority. In other words, we will have to live with a much more hawkish Fed (at least verbally) that will not be easy for investors. Jerome Powell's task of preserving the benefits of his monetary policy will be particularly difficult.


An important change is underway. Monetary policy is becoming more accommodative as China has cut the reserve requirement ratio (RRR) for banks as well as the one-year “loan prime rate”, a small cut albeit very significant. In view of the very challenging situation in the Chinese property market currently, further support measures are expected in the near future. A more expansionary policy in China could contrast with the more restrictive policy in the US, favouring a recovery in Asia, which was heavily penalised in 2021.

China Skyline

Outlook for 2022

For 2022, we do not expect a repeat of the last three years. Stock market performance should be more modest but still positive. There will be more volatility due to the slowing economy (which should however remain above trend growth) and less accommodative monetary policies, which will not (yet) become too restrictive.

Equities remain our preferred asset class. Earnings growth is set to be less spectacular than in 2021 due to rising labour costs and producer prices. However, earnings should continue to grow on the back of higher revenues and operating leverage.

Unfortunately, there is nothing to expect from government bonds, which will likely perform negatively as they did last year. Long-term yields remained abnormally low, especially when measured against inflation, despite the Fed's change of tone. We expect a slight rise in bond yields, but not sufficient to steal the thunder from equities.

Key data from 27/12/2021 to 31/12/2021

Index Close +/- Ytd 2021
Belgium: Bel-20 4310,15 1,07% 19,02%
Europe: Stoxx Europe 600 487,80 1,10% 22,25%
USA: S&P500 4766,18 0,85% 26,89%
Japan: Nikkei 28791,71 0,03% 4,91%
China: Shangai Composite 3639,78 0,60% 4,80%
Hong Kong: Hang Seng 23397,67 0,75% -14,08%
Euro/dollar 1,14 0,38% -7,06%
Brent oil 78,40 3,21% 51,09%
1822,39 0,77% -3,97%
Belgian 10-year rate 0,18    
German 10-year rate -0,18    
US 10-year rate 1,50  

Refinitiv Datastream

The opinions given on this website are those of the authors and do not necessarily represent the position of BNP Paribas Wealth Management.