A Natixis Investment Managers webinar examined what’s been happening in the investment market over the past year and trends to watch ahead of 2022. The investment experts at the 2021 “Natixis Strategist Midyear Market Outlook” also detailed their expectations for investors as the globe prepares to head into a recovery phase post-pandemic.
Esty Dwek, head of global market strategy for the dynamic solutions team at Natixis, began the panel by observing that the U.S. has had a slow path to recovery, given new coronavirus variants and the initial gradual rollout of the vaccine in the first half of 2021. As the Delta variant becomes more widespread and COVID-19 infection rates rise among Americans, Dwek said she does not foresee an immediate recovery in the short-term. “We knew it wasn’t going to be a smooth, straight-line recovery and these past few weeks have shown this to us,” she said.
Lynda Schweitzer, vice president and portfolio manager at Loomis, Sayles & Co., pointed to changes in supply and labor as a disruption to the economy. As more people are hesitant to return to work, companies are promoting jobs by raising wages. Dwek said she does not anticipate a return to normal wages as a result.
“We know that some people are not so keen to come back to the labor market,” Dwek noted. “Does that mean that wages will go back? I don’t think so, but it is something we will need to watch.”
Schweitzer agreed, adding, “We weren’t expecting the U.S. to slow in growth, but we were expecting the rest of the world to catch up on the vaccination front. It will probably take longer to play out. Delta variants and supply chain disruptions prolong this growth.”
Schweitzer also said high housing prices and wages are two key pieces to watch in the market. Among with supply and labor chains, a surge in demand for housing and rising wages are contributing to increased inflation, she said.
The panelists also identified emerging market trends throughout 2020 and into 2021, saying environmental, social and governance (ESG) investing and cryptocurrency are continuing to be major points of interest for the market. According to Natixis’s recent “Individual Investors” survey, almost half of participant say ESG strategies have become mainstream, and 26% say an ESG strategy is a must-have investment.
Dwek said ESG investing options are no longer niche and now permeate across asset classes and conversations with clients across the globe. “Asia is catching up quickly, while the U.S. is slowly catching up. In Europe, regulation is making this a must-have and is leading investors into this direction,” she said.
“ESG is just going to become one of the initial parts of the conversation with investors across asset allocation in the coming years,” Dwek continued.
Clients are also inquiring about ESG outcomes, not just sustainable reporting, Schweitzer said. “They want outcomes and engagement and to show that we are being participatory on ESG issues,” she explained. “It will continue to evolve and become an essential part of any investment process.”
While 17% of respondents in the survey believed cryptocurrency to be a fad and 12% said it’s a “disaster waiting to happen,” Dwek said she believes digital assets will succeed without removing power from central banks or countries; however, she admitted that there’s still some uncertainty regarding crypto’s risks.
“I do have some degree of skepticism as well. I do think the risks are underappreciated,” she said. “But I do think it’s here to stay.”