After-Shocks and Resets: Mackenzie Investments Forecasts Challenges Amid Economic Recovery in 2022 Outlook Report

The firm’s investment professionals anticipate a series of “after-shocks” following the sustained shake-up of most global economic systems as much of the world recovers and resets from the worst of the COVID-19 pandemic. The critical factor that will define 2022 and beyond is anticipated to be how capital markets respond to the reverberating shocks.

“Though few expected the pandemic to persist, we knew that the economic recovery would be a long game and that remains true as we ring in 2022,” said Brent Joyce, Investment Strategist, Mackenzie Investments. “While the forecast isn’t necessarily clear skies, there is reason for optimism. At home, we hold a positive view on Canadian equities and anticipate strong capital returns to shareholders through dividends and share buybacks, particularly from the Canadian banks and energy companies.”

In its 2022 Outlook, Mackenzie forecasts three areas that are key to an economic rebound next year:

Inflation: Reset, not Revolution

After a decade of inflation below two per cent, Mackenzie predicts it will climb to a higher level, but will not spiral out of control. This is a significant factor for all asset classes as inflation has the power to impact the outlook for each, depending on the source, nature and the growth environment surrounding the shift in inflation. The report notes that, in the current environment, both demand and supply forces are at play, and the data continues to be heavily distorted by the pandemic.

“Our view on inflation is that we are experiencing a reset to a new base level,” noted Mr. Joyce. “Global deflationary forces, productivity gains, and fading medium-term transitory factors are expected to keep inflation from spiralling out of control. But, of course, we must consider the central banks.”

Central Banks: An Easy-Handed Approach

Global central banks are in a difficult position going into 2022 as inflation persists.  According to the report, over-or under-reacting could risk derailing an already fragile recovery period. Typically, central bankers would increase interest rates in response to higher inflation, but Mackenzie analysts understand that there are special considerations in the current environment: Raising interest rates too soon or too aggressively could lead to a recession, and with the world economy saddled with massive debt, any increase in interest rates would drive up the borrowing costs on this debt.

“We believe that central banks will take a light touch on interest-rate policy, which will give them the leeway to remove stimulus and accommodative monetary policies in a gradual and orderly fashion. That said, the need to lift rates off the floor will bring uncertainty to stocks and bonds.”

China: Quality Growth over Quantity Growth

China remains a key driver of global growth. While investors will continue to worry about policy changes in China that may seem anti-free market, Mackenzie believes that policymakers in the country are aware that their economy cannot grow without its vibrant private sector, which accounts for 60 per cent of its GDP and 80 per cent of jobs.

“It’s clear that after decades of a mindset that Mackenzie characterizes as ‘growth at all costs,’ China has evolved to seek a stable and sustainable growth path that we believe will benefit investors—and the world,” concluded Mr. Joyce.

To learn more about Mackenzie Investments and its 2022 outlook, visit: https://www.mackenzieinvestments.com/content/dam/mackenzie/en/mutual-funds/mi-blue-book-outlook-en.pdf

About Mackenzie Investments

Mackenzie Investments is a leading investment management firm with $205 billion in assets under management as of November 30, 2021. Mackenzie provides investment solutions and related services to more than one million retail and institutional clients through multiple distribution channels. Founded in 1967, Mackenzie is a global asset manager with offices across Canada as well as in Boston, Dublin, London, Hong Kong and Beijing. Mackenzie is a member of IGM Financial Inc. (TSX: IGM), one of Canada's premier financial services companies. For more information, visit mackenzieinvestments.com.

For further information:
Nini Krishnappa
647-828-2553
nini.krishnappa@igmfinancial.com