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14 January 2022

Against the backdrop of a return to growth, the reduction of monetary support programs, rate hikes and the Omicron variant, La Française AM shares its view regarding the markets stance as well as its outlook to start off the year on the right foot.

Despite disruptions in the production system and the oscillation of constraints linked to health risks, global growth continues. The instantaneous trend remains positive but is nevertheless difficult to assess precisely. The Chinese slowdown, which is mostly the product of political initiatives to fight against the pandemic, social disparities, and promote a cleaner economy, will be one of the major unknowns in 2022.

Short-term trends in the United States and Europe diverge slightly. After a slowing third quarter, the American growth accelerated in the fourth quarter. In Europe, the impressive third-quarter figures may soften slightly. Yet, multiple indicators suggest an interesting basis for 2022.

Indeed, 2022 is shaping up to be a strong economic year, barring a major health interruption. Of course, the Chinese activity downturn in conjunction with the real estate finance crisis must be closely observed. However, supply disruptions should gradually ease and states will continue to support the economic players most affected by the pandemic. On the private sector side, household savings rates and corporate profits remain high. Despite recent inflation's impoverishing consequences, these variables will encourage final consumption and investment across a wide range of sectors, compensating for the recent period and responding to emerging problems, most notably climate change.

On the political side, the central issue is likely to be which version of President Biden's economic plan is finally adopted. Finally, the issue of inflationary risk will continue to preoccupy investors, even though the monetary environment has changed. We continue to believe that inflationary shifts will rapidly decline and allow central banks to maintain financial conditions favourable to the economy in regards of actual rates and financial market performance.

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