Small Caps And Global Banks Are Best Bets For 2022 According To Multi-Trillion Dollar Strategists

Nuveen chief investment strategist Brian Nick (left) and BNY Mellon head of portfolio strategy Eric … [+] Hundahl (center) sit down with top advisor Steven Dudash of IHT Wealth Management (right) at a Forbes/SHOOK event in Chicago.


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Discussing the investment outlook for 2022, a pair of investment strategists at trillion dollar firms said that U.S. small cap stocks and global banks are the two best sectors to bet on next year.

BNY Mellon head of portfolio strategy Eric Hundahl, whose firm manages $2.3 trillion, expressed bullish sentiments on U.S. small cap stocks, expecting the current outsize spread between small and large cap to eventually correct.

Brian Nick, chief investment strategist at $1.2 trillion Nuveen, mentioned global banks, specifically in the European Union and United States, as his best bet for 2022 with expectations for the global economy to have a strong year. Stretching his predictions out a bit further, Nick said he sees risk in the next decade for returns to be lower than they were in the 2010s.

Speaking yesterday at a Forbes/SHOOK regional conference in Chicago, Nick posited a scenario where tapering and improvements to supply chain conditions could help battle inflation and delay the much anticipated interest rate hikes in 2022. He added that much of the markets reaction to inflation is less about its economic impact and more about what the Fed will do in reaction.

The market has priced in two and a half rate hikes next year, according to Nick, who says that zero rate hikes in 2022 is a more likely scenario than than three.

Nick compared the current conditions with the last time the Federal Reserve tapered purchases in 2014, after which they waited a year before raising rates. Nick feels the recently announced faster tapering buys them more breathing room on rate hike decisions.

With all these central bank actions geared at combating inflation, Hundahl said he feels that we have reached peak inflation with bottlenecks in the supply chain improving, a stronger labor market and 3 million Covid retirements all set to bring down inflation.

Discussing the two largest forces influencing market sentiment, Hundahl said that the question to look at is whether Covid or inflation will be more persistent and the answer is probably inflation, adding that inflation is also likely more priced in by markets.