8. UBS

inflation

UBS

Inflation forecast:

"High inflation flips to low inflation in 2022. We expect an outsized deceleration in price gains in 2022. Core PCE inflation falls from a peak near 4.7% in early 2022 to 1.7% in Q4. That said, even if our projection is correct, given publication lags and noisy data, the CPI and PCE prices slowing won't be obvious and unambiguous until well into the second quarter, and year-over-year, core PCE inflation would still be near 2-1/2% in the third quarter."

Investment recommendations:

"Energy, Financials and parts of TMT over defensives and Materials. As the expansion takes hold, our frameworks support staying long parts of growth and value while maintaining underweights in defensives. We remain overweight Communication Services and Tech on strong growth & momentum and pricing power as well as historically strong returns at this stage of the cycle, preferring Media, Interactive Media & Services, Tech Hardware & Equipment and Application Software. We stay OW Financials and Energy as asymmetries to a "growth stays high" and rising rates scenario points to a tactical catch up that has further to run."

"We stay UW Materials given downside risks to a slowing durable goods and property investment backdrop (China, commercial). Industrials and Consumer Discretionary are a neutral+, as pockets of those sectors look attractive such as Autos, Apparel, Machinery and Airlines. We remain tactically overweight small caps as relative valuations (vs large) fell to historical lows and earnings momentum remains strong."

-Read more: https://www.businessinsider.com/stock-market-outlook-inflation-forecasts-prediction-2022-investing-ideas-recommendations-2021-12#4-goldman-sachs-4