central bank target in 2022. In particular, risingwages in the US are raising fears of more long-lasting inflation and leading the Fed to react. A cycle of rising rates has begun this year. The Fed and the BoE initiated themove, followed in part by the ECB, which brought forward the end of its asset purchase policy to give itself more roomto raise rates i f necessar y. Monetar y pol icy wi l l remain accommodative, with real interest rates remaining in negative territory, but less favourable than in 20202021, leading almost mechanically to an adjustment in asset valuations. The dollar's strength at the start of the year could gradually dissipate from mid-2022 onwards as markets integrate the rate hikes. In this multi-speed normalisation where the ECB will be in the background, expectations of a strong rebound of the currency may have to be moderated. Emerging countries are preparing or even anticipating this normalisation of US monetary policy. Some are already ahead of the curve, such as the Brazilian and South African central banks, which have raised rates under pressure from accelerating inflation and a weakened currency, at the risk of curbing growth. In this monetary panorama, there is one notable exception, China, which is lowering its rates to strengthen its support for the economy, particularly in the face of the crisis in the property sector and the threat of a resurgence of the epidemic. The main risk of this normalisation scenario is that long-term interest rates could rise too sharply, which would have a negative impact on equity markets and bond risk premiums. The beginning of the year saw some of this riskmaterialise, with theUS 10-year yield reaching 2%, together with a correction in growth stocks and a widening of credit spreads. The other major risk at the beginning of 2022 is obviously the rise in geopolitical tensions in Eastern Europe, leading to both a recession in Europe and a return of volatility to the peaks of 2021. On the corporate side, a return tomore normal levels of earnings growth is expected after the 2021 boom. The downward revision of forecasts automatically leads to a much more moderate growth in profits. In addition, the pressure on rawmaterials is increasing the pressure on margins. Therefore, we believe that the key theme for 2022 will be the sustainability of profit margins and cash flow generation. 25
RkJQdWJsaXNoZXIy NzMxNTcx