Inflation worries persist

More than half of respondents said inflation was their biggest concern in 2022, according to a CNBC survey of about 400 chief investment officers, equity strategists and portfolio managers. At the same time, 30% of respondents said they were most worried about the Fed raising interest rates at the wrong time, while 17% said the impact of the lingering epidemic on the economy was the number one concern.

Us CPI rose 6.8 per cent in November from a year earlier, the biggest year-on-year increase in nearly 40 years. The year-on-year increase in the personal consumption expenditure (PCE) price index also jumped to 5.7%, the highest since 1982.The Fed has said it will take aggressive policy measures to deal with rising inflation, including accelerating the pace of tapering bond purchases, and officials expect as many as three interest rate increases next year.

"there are some serious headwinds to worry about," Brad McMillan, Commonwealth Financial Network's chief investment officer, said in a report. Inflation is at its highest level in decades. The supply chain problem seems to be difficult to solve. If these problems continue to worsen, they could undermine the economic recovery. "

The average American family is also feeling the impact of rising prices. Prices of everything from biscuits to real estate are skyrocketing. Rising consumer demand has prompted retailers to pass on higher production costs to customers by raising prices. It is not surprising, then, that inflation will remain the top priority for investors in 2022.

Wall Street Forecast and Investment advice

According to Business Insider, most investment banks expect inflation to fall from its current alarming high as supply chain bottlenecks ease, but it will remain high than it was before the epidemic.

Wells Fargo & Co Investment Research Institute said in its 2022 outlook report: "although the supply chain and related inflation headwinds may continue into the first half of 2022, we expect some relief after the middle of the year." We expect inflation to slow down from current levels in 2022, but still above recent historical normal levels. "

Other investment banks, such as Goldman Sachs Group and Morgan Stanley, seem to agree, but they differ on the lasting impact of inflationary pressures. Some predict that higher inflation will last for several years, while others believe that inflation will soon return to historical normal levels.

Here are nine top Wall Street companies' forecasts for inflation in 2022, as well as their comments and investment advice on the stock market.

• Bank of America Corporation

Inflation forecast: Ethan Harris, head of global economic research at Bank of America, expects global inflation to slow in 2022, while US growth (4 per cent) and inflation (4.6 per cent) will remain high. "in view of continuing supply challenges such as port congestion, bottlenecks and delays, production disruptions and slow recovery of labour supply, we expect inflationary pressures to continue to rise in the coming months. What will happen next year is that inflation will continue to be above target and the composition of price pressures will change. Persistent inflationary pressures are likely to accelerate and should be seen as easing the 'temporary' pressures associated with the outbreak. "

Investment advice: Harris saysIn the face of rising interest rates, pressure on profits and arguments about the impact of inflation, investors can take the following defensive measures to prepare for 20221) the Fed raises interest rates to avoid buying US Treasuries and investment grade bonds; 2) reduces equity diversification; and 3) hedges against "interest rate shocks". In addition, "energy stocks and financial stocks provide inflation-protected returns." The Healthcare Unit provides growth / benefits at reasonable prices. We have low-end communications services stocks (long-term / crowded), essential consumer goods stocks and non-essential consumer goods stocks.

• Blackrock Investment Research Institute

Inflation forecast: inflation will fall from recent highs as supply constraints ease and consumer spending shifts from goods to services. "We think inflation will continue in the coming years. One driver is that we believe that major central banks will tolerate higher inflation than in the past, so the policy response will be much milder. "

Investment advice:"in the context of strong resumption of inflation, we are bullish on stocks. We prefer developed market stocks to emerging market stocks. We undersell developed market government bonds-we expect yields to rise gradually but remain at historically low levels. Be bullish on inflation-linked bonds as part of diversification. At the strategic level, we are optimistic about private equity markets because of their diversification and return potential. "

• Deutsche Bank

Inflation forecast: "the inflation range has expanded and will take longer to eliminate." Rising underlying inflation, high inflation expectations and accelerated wage increases will all support higher-than-target inflation in 2022, with core CPI and PCE inflation likely to be 3.5 per cent and 2.7 per cent respectively by the end of next year. With the repair of the supply chain, the return of labour supply and the fact that commodity prices are still below peak, inflation should fall back near the target level by 2024. While the risk of medium-term inflation is clearly on the upside, we believe that both upside (rent) and downside (accelerated supply chain problem resolution) risks are likely next year. "

Investment advice: "On the plate side, we maintain an overallocation of energy, materials and finance.Tactically shift to overweight other cyclical stocks; remain neutral on large growth stocks and technology stocks, while underweight defensive stocks. "

• Goldman Sachs Group

Inflation forecast:"there are no short-term solutions to the supply chain and input cost problems that plague many industries.However, management has used price increases, cost control and technology to maintain profits, and many disadvantages will be alleviated in 2022. But the labour market will remain tight and drive wage inflation. Our commodities research colleagues predict that Brent crude prices will peak at $90 a barrel in early 2022 and then fall to $80 a barrel by the end of the year. Our economists expect US GDP growth to slow from 4.5 per cent in the first quarter of 2022 to 1.8 per cent in the fourth quarter. Meanwhile, core PCE inflation will fall from 4.3 per cent in the first quarter to 2.4 per cent by the end of the year. "

Investment advice: 1) hold cyclical stocks that are sensitive to viruses and inflation; 2) avoid companies with high labor costs; and 3) buy high-profit growth stocks instead of low-profit or no-profit growth stocks. Over-allocated technology, finance and health care stocks.

• Fu Rui Group

Inflation forecast: "with the expansion of all areas of the US economy, inflationary pressures are unlikely to ease next year."... One of the biggest questions for investors over the next 12 months is the extent to which the labour market is idle and how long it will take to be digested. The answer to this question will determine whether inflation will prove temporary and whether the Fed will raise interest rates in 2022. We believe that the United States is entering the tightest labour market environment since the 1950s. As a result, even if supply chain bottlenecks are removed, inflation is unlikely to return to 2 per cent, but is more likely to stabilize in the 2.5 per cent range of 3 per cent. "

Investment advice: "in our global asset allocationWe are still moderately bullish on the US stock market.. We have adjusted our view of health care stocks to be bullish to reflect better risks and rewards. Our view on real estate stocks (bullish) is different from the general consensus. We are bullish on a variety of unrelated topics, including the capital spending boom, broadband consumption, the beneficiaries of increased agricultural spending, the return of capital from European re-inflationary transactions and the thorny issue of hiring. "

• JPMorgan Chase & Co

Inflation forecast: "the easing of global supply constraints should reduce price pressure, and we expect global CPI inflation to fall to 3% in the first half of 2022." While there is no doubt that the 5 per cent surge in consumer prices this year should fade, limited idle, above-potential economic growth and the gradual normalisation of monetary policy suggest that core inflation in developed markets will be at least 0.5 percentage points higher than it was before the epidemic. "

Investment advice:"from a regional point of view, we expect some convergence in price-to-earnings ratios across regions. Europe will do well in developed markets, while China will stand out among emerging markets.. In terms of style, sectors and themes, we still prefer pro-cyclical stocks, especially given the recent correction, we are bullish on inflation-sensitive sectors-energy and finance (rather than necessities and utilities), consumer services (rather than consumer goods), health care (rather than other defensive stocks) and small stocks (rather than large caps). At current prices, the risks and rewards of tourism, leisure and experience themes are extremely attractive. Despite some signs of easing of bottlenecks in commodity production, labour supply remains tight, which could lead to non-temporary inflationary pressures. As a result, we are shorting a basket of global stocks with high labor intensity and weak pricing power. "

• Morgan Stanley

Inflation forecast: "inflationary pressures on the prices of epidemic-sensitive goods and services last longer. Morgan Stanley expects core PCE inflation in the US to be 3.9 per cent at the end of 2021 and to fall to 2.4 per cent by December 2022. Core PCE inflation will begin to fall from its peak after February, and then slow gradually. Core PCE inflation will slow further by 2023, reaching 2.0 per cent by the end of the year. "

Investment advice: "given that we believe that the operating environment will be more difficult and long-term interest rates will be higher."By the end of next year, we are optimistic about stocks with stable profits and low valuations.. This has prompted us to overmatch the healthcare, real estate and financial sectors, while taking a more constructive view of consumer / business services and software with reasonable valuations. Our low-end non-essential consumer goods and technology hardware sectors are more bullish on large-cap stocks than small-cap stocks, and tend to favor value stocks rather than growth stocks in the short term. With the prevalence of macro uncertainty, this trend is likely to be reversed in 2022. "

• UBS

Inflation forecast: "High inflation will turn to low inflation in 2022." We expect price increases to slow significantly in 2022. UBS expects core PCE inflation in the US to fall to 1.7 per cent in the fourth quarter of next year from a peak of nearly 4.7 per cent at the start of the year.

Investment advice:UBS is more bullish on energy, finance and some TMT stocks than defensive stocks and materials stocks."as economic expansion takes hold, our framework supports continued multi-sector growth and value stocks, while maintaining a low premium to defensive stocks. We still overmatch communications services and technology stocks because of their strong growth and momentum, strong pricing power, and historically strong returns at this stage of the cycle. we prefer media, interactive media and services, technology hardware and devices, and application software. In view of the downside risks of a slowdown in durable goods and real estate investment, we will continue to sell low-end materials stocks. The view on industrial and non-essential consumer stocks is neutral + because some sectors such as automobiles, clothing, machinery and aviation look attractive. We are still tactical over-allotted small-cap stocks as their relative valuations (relative to large-cap stocks) fall to historic lows and earnings remain strong. "

• Wells Fargo & Co

Inflation forecast: "A shortage economy may keep inflation high, and inflation will not fall in the second half of 2022 until the pressure on the supply chain alleviates." We expect average consumer price inflation to be 4.0% in 2022, down from 6.2% in October 2021. Inflation should remain above the level before 2020, but not high enough to end economic expansion. The upside risk to inflation is that rents and wages become self-sustaining, but we believe inflation should slow as supply shortages ease. "

Investment advice: "Compared with international stocks, we are optimistic about American large and medium stocks.At the same time, be bullish on cyclical stocks and growth stocks, not defensive stocks. Preferred sectors are communications services, finance, industry and information technology. "