We caught up with James from Summit Financial, a Partner Practice of St James's Place Asia for his outlook for 2022. 

2021 was a volatile year with a New Administration in the US, widespread Covid19 Vaccine rollout, rising inflation, and energy crisis S&P 500 reached record highs over 60 times Hong Kong and China remained weak. 

Looking ahead main themes that are likely to persist.

• Inflation

• Sustainable Investing

• Cyber Security

Key Points From St James's Place Asia Investment Team. 

• Now is the time to review your finances. It is an excellent time to review where my money is and whether my circumstances have changed over the last year. Set a new financial goal or perhaps one of the assumptions I made in the previous year's review needs to be updated.

• Lose some weight and put some excess cash holdings to work. Holding onto cash can be comforting in the short term but is rarely good for my long-term financial health, particularly when interest rates are lower than inflation, meaning that any cash I'm holding onto is losing value, as you read. 

• Focus on the Future. It's easy to let fears get the better of us amongst these volatile times – humans are naturally "negativity bias" is well researched and understood. Better to focus on the long-term goals and avoid knee-jerk reactions in the short term.

• Be More Green. There is no point in having lots of cash if my or my grandchildren's homes are underwater or at risk by more frequent and extreme typhoons. I am, therefore, extra keen to ensure that my money is used for good so that we can all safely transit to a sustainable world.

• Learn a new language - The "metaverse," "artificial intelligence," and "cybersecurity" are all new (-ish) buzzwords that will likely have an impact on our lives.

The bottom line is that many of us would be looking at ways to better our lives as we say goodbye to 2021 and welcome 2022. The same resolutions can be equally applied to how we manage our finances and investment to drive a better future for ourselves and our loved ones.

Areas of focus for the coming year - Highlights

Sustainable investing

Investing sustainably can be 27 times more efficient than reducing meat consumption, taking the train instead of the car, taking fewer flights, and shortening your shower time (Source: Nordea, 2017). We have seen particularly high growth in electric vehicles (EV) and associated industries like battery production like nickel, lithium, and cobalt. However, they come with the question of how sustainable they are and the human rights impact. "The devil is in the details". When structuring investments and portfolios, ensure you are looking below the bonnet, checking the details, carrying out fundamental analysis and due diligence, and challenging the companies you invest in to ensure they do what they say they will do. 

The value of the investment will be directly linked with the performance of the funds selected and may fall and rise as well. You might get back less than you invested. 

Inflation

One of the risks that emerged and surprised many investors in 2021 was inflation. The Fed officially retired the word 'transitory' in December, and most recently, central banks have been taking a tougher stance to address inflation, with Fed rate increases on the horizon for 2022 and the Bank of England already having made the first increase in December.

Investments that can protect from inflation over time include physical assets and equities, noting that companies with an edge in the market will typically pass on rising costs to customers in the form of higher prices charged for their goods and services.

Warren Buffet explained it neatly this way back in April 2021: "We're raising prices, people are raising prices to us, and it's being accepted", though passing on of costs may not always happen in a linear, time congruent way and clearly, equity prices can still be volatile and subject to correction risks.

The value of the investment will be directly linked with the performance of the funds selected and may fall and rise as well. You might get back less than you invested. 

China economy

Two of the bigger market scares in 2021 came out of China, firstly the regulatory crackdown centred in the technology and education sectors, then the Evergrande crisis. 

One of China's biggest challenges is the ageing demographics and decreasing birth rates. China is tackling this in leading automation and efficiency and higher workforce education to manage the impending wave of retirees, who fortunately do have a good amount of household savings for spending in retirement.

High living costs and related pressures are being seen as associated with this demographic challenge, therefore allowing one to rationalise the crackdowns on property speculation, high private education costs, anti-competitive practices resulting in a higher price to consumers, and gaming concerns in a bid to focus on long-term economic stability.

The value of the investment will be directly linked with the performance of the funds selected and may fall and rise as well. You might get back less than you invested. 

Opportunities and Threats 2022

Cyber attacks are now daily news and to combat this,  Artificial Intelligence and technology, including the vision of the meta-verse and the rise of NFTs all point to development in the technology space. Recent cyber vulnerability discovered concerning Log4j, a utility that runs in the background of many software applications that expose an organisation's computer network to attackers, has also highlighted the need for a longer-term need for better cyber security, highlighting opportunities in this space. 

The value of the investment will be directly linked with the performance of the funds selected and may fall and rise as well. You might get back less than you invested. 

To read the full report, please click here

The Expatriate always tries to make sure all information is accurate. However, when reading our website, please always consider our Disclaimer policy.