Getting Your Portfolio In Shape

The key word is "Resilience"

With COVID-19 still clouding the 2022 outlook, the strength of global economies and investors' portfolios could be tested by risks such as higher inflation, geopolitical tensions and tighter regulations.

To keep your investments resilient amid volatility, we have identified some key investment themes to keep in mind in 2022.

Sustained, but slower global growth

Expect growth to continue in 2022, but at a slower pace. What investors will need to look out for are three key risks.

• Inflation: While inflation is expected to moderate, it may turn out to be more persistent than expected. Central banks may be forced to accelerate monetary policy tightening that could eventually dampen growth and increase the likelihood of stagflation. This could hurt consumer demand and eventually corporate earnings.

• US-China tensions: COVID-19 occupied most of our attention over the past two years but there are signs that the simmering tension between the two largest economies could start to flare up again. The last time it did, both the United States and China started a trade war that hurt global trade. A re-escalation of tensions could put further strain on the global economy.

• Tighter regulations: One wildcard that could swing growth the other way is increased regulations, especially in technology. The Chinese government has already started to regulate Chinese tech firms in 2021, while both the European and US authorities are looking at anti-competitive behaviour by the tech behemoths. Higher taxes could hinder global growth as well.

Build portfolio resilience

The reason? In view of the lingering growth and policy uncertainties, investors should be prepared for volatility to return from time to time. As such, maintaining a cash buffer and avoiding over-leverage is key. Active selection could also play a bigger role as market returns moderate in a maturing recovery. Last but not least, it remains critical to maintain a diversified portfolio with an increased emphasis on sustainability to help future-proof your investments. With all this in mind, investors can be cautiously optimistic that 2022 will prove to be a year of resilient returns.

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