The dramatic and uneven rebound in growth across countries this year is likely to ease to synchronized moderation in 2022, though to a still above-trend pace.
We expect not only a peak in growth, but also in inflation and policy support. The global pandemic also appears to be waning. These four peaks were a focal point of our investment forum in early June, and the takeaways are discussed in detail in our recently published Cyclical Outlook, "Inflation Inflection."
We believe the global economy, as it moves beyond these peaks, is now in mid-cycle. From an asset allocation perspective, this means growth-oriented assets, such as equities and credit, may still offer relatively attractive returns. But we expect greater dispersion across sectors and regions. Moreover, elevated valuations and lower yields portend lower beta returns. Bottom-up differentiation within asset classes - such as country, sector, and issuer selection - will likely be key to driving returns in the current environment.
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