Outperformance, SPACs, diversity - a market wish list for 2022

AS a difficult year nears an end, it is timely to indulge in a spot of wishful thinking as far as what the next year might hold in store for local stock market investors.

No doubt most players will want economies to continue their post-pandemic recovery, for the threat from Covid variants to peter out, and for equities to outperform as they have done for the better part of the past 10 years. For this to occur, one wish is that equity markets learn to live comfortably in a rising interest rate environment. Global monetary policy has been too loose for too long as countries have lurched from one crisis to the next, forcing central banks to artificially depress interest rates and flood markets with liquidity to stimulate lending and growth. With current inflation readings running high, the era of easy money looks set to end, and the sooner markets adjust to a new normal of higher rates and lower central-bank money injections, the better.

A second wish relates to the local market - for the success of special purpose acquisition companies (SPACs) when they make their debut here. The framework for this novel means of listing new firms has been installed and investors are waiting for the entry of targets, which would mainly be 'disrupters' of consumer, technology, or biotech markets. Such firms are not easy to identify, and many are speculative, have enormous capital requirements, and can provide only limited assurances on near-term revenue and viability. As a result, there is recent research to suggest that after massive interest last year and in early 2021, the best SPAC performance may be a thing of the past. Hopefully, this does not prove to be the case when SPACs list here.