Hong Kong: Asian markets were mixed on Tuesday, as investors struggled to lead another record on Wall Street. This was due to the ease of concerns about Omicron and the continued optimism of economic recovery.
Although the new Covid variant is spreading around the world like wildfire, it seems to be far less serious than initially feared, which makes people hope to overcome the pandemic and return to normal life.
However, inflation, supply chain barriers, tightening of central bank policies and geopolitical difficulties continue to weigh on market sentiment, and analysts warn that the sharp rises in recent years may be more difficult to achieve.
“We expect 2022 to be far more challenging from an investment perspective,” Heather Wald, of Bel Air Investment Advisors, noted. “Rarely has a market delivered three consecutive years of double-digit returns, as we have seen from 2019-2021.”
Still, she still expected “equities to remain attractive versus other liquid asset classes”.
And market strategist Louis Navellier added: “Equities are still the only game in town, with cash and bonds offering negative real returns, and equities forecasted with double-digit earnings growth and record stock buybacks anticipated.”
The Dow and S&P 500 started the new year in the same fashion as they spent most of 2021, by notching up new all-time highs, while the Nasdaq also rallied thanks to a surge in big-name stars including Apple, which briefly became the first firm valued at $3 trillion, and Tesla.
But the Asian market is not so convincing.
Tokyo and Sydney each rose more than 1% on the first trading day of the year, while Singapore, Taipei and Jakarta also rose.
But dragged down by technology companies and continued worries about China’s real estate industry, Hong Kong and Shanghai fell, while Seoul was also at a loss.
Investors will pay close attention to the release of the minutes of the Fed’s December policy meeting, hoping to have some understanding of its plans for this year in the face of soaring inflation, which will force central banks around the world to stop pandemic stimulus measures.
The Fed has begun to scale back its bond purchase program, and now the focus is on how it will handle interest rates. Some commentators predict that it will raise interest rates three times before 2023.
Expectations that interest rates will rise pushed the 10-year US Treasury bond yield to over 1.6% on Monday, but analysts said this may also reflect optimism about the economic outlook.
And strategist Navellier remained positive.
“We’ve climbed bigger walls of worry than we face today,” he said. “I am expecting a very strong January, characterised by higher trading volume as well as stunning fourth-quarter sales and earnings announcement.
“Interestingly, thanks to political gridlock, the private sector is expected to dominate GDP growth in 2022. Inflation is expected to persist, but may moderate somewhat in the second half of 2022.
“In my opinion, the Fed will remain accommodative in 2022 and the Goldilocks environment will continue.