10 investment themes for the Year of the Chameleon investor

AFTER 3 years of double-digit returns for major stock indices, 2022 could genuinely be a decisive year for markets even should Covid-19 concerns recede, and also a delicate one for investors. To survive and prosper, they may well have to move like a human chameleon - changing their behaviour as circumstances dictate.

For a start, some central banks are withdrawing liquidity support, winding down quantitative-easing schemes. Markets will be doubly challenged when the US Federal Reserve starts raising rates. How far monetary tightening goes will largely depend on the inflation outlook, and one will have to distinguish which prices' rise will prove to be transitory and which ones are of structural nature.

Supply-chain problems could ease quickly in certain sectors, but labour shortages are here to stay. In any case, the economic cycle could become volatile, especially if inflation concerns induce central banks into making policy mistakes and new Covid-19 waves force partial shutdowns. A renewed pandemic wave could keep workers at home, worsening the labour market tightness.