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January 12, 2022

2022 Outlook – North American Equities

Many of the dynamics that dominated markets in late 2021 are likely to continue their impact as we enter 2022. A new COVID-19 strain, tagged as Omicron, rattled markets with renewed threats of economic lockdowns and left us wondering if we will we ever get back to “normal” or at least something resembling the old “normal”.

The pandemic has certainly magnified the point we are a global community, despite the fact we act regionally. When it comes to elements such as infectious diseases and the climate, we are all in this together. Regions with low vaccination rates facilitate the evolution of the virus and increase the risk that harmful variants will continue to emerge. Regional policy responses also have a significant influence. In much of the western world, we have monitored hospitalization rates and health care capacity as the critical barometer to trigger social and economic lockdowns.

China, and select other regions, have a much stricter COVID-19 policy, requiring regional lockdowns and quarantine at the first signs of infection. This low tolerance policy can reduce infection levels, but has the potential to slow economic growth as well as create recurring supply chain disruptions. The flipside is the vaccination rate continues to climb and vaccines seem to be extremely effective at preventing severe disease from all known variants.

Antiviral drugs are also becoming available, providing an additional treatment response that should ultimately help relegate COVID-19 to an endemic, similar to the flu. Our base case continues to be we are through the worst of the social and economic impact, and a gradual reopening will continue, albeit with continued bumps along the road. 

Economic impact


When we look at the economic impact of COVID-19, it’s important to acknowledge that thanks to the response of governments and central banks, the virus did not eliminate economic growth. Instead, it shifted spending to goods from services, as we all spent more time in our homes. This spending on goods, in combination with supply chain disruptions, induced a spike in inflation.

The goal of central banks is full employment and price stability with short-term interest rates being the primary tool to influence spending and inflation. The set rate influences the pricing of essentially all assets, including equities. A critical question for markets in 2022 is: are short-term rates going higher and, if so, by how much? This in turn is linked to whether high inflation persists, threatening price stability. Our view, similar to COVID-19, is we are through the worst of the disruptions and have seen peak inflation. Supply chains will continue to mend, taking out the scarcity pricing that drove the exceptional level of inflation experienced at the end of 2021.

Assuming we can continue reopening, particularly as we move into the warmer months, spending may shift from goods back to services. Services generally run at a greater inflation level than goods, so as inflation retreats from recent peaks, could be a prolonged period of higher inflation than we experienced pre-pandemic. Central banks are motivated to move short-term interest rates off the zero-bound to create future flexibility. However, our view is expanded debt levels will cap short-term rates fairly low (around 1%) before any significant economic impact.

Positioning and opportunities

For North American equities, ongoing COVID-19 uncertainty in combination with the potential for higher interest rates is likely to bring continued market volatility. Travel and entertainment stocks are the most impacted as pandemic headlines ebb and flow. This does create opportunities, but we will be careful with our exposure and be sure to only invest in companies that can survive a prolonged period of reduced activity. Regarding inflation, equities generally perform well in such an environment. Strong companies have pricing power to pass on costs and continue to grow. For example, it is unlikely Microsoft would be stripped from corporate IT environments because it increases prices 5%.

The core of our portfolios will continue to be in corporations that have robust business models and can navigate an inflationary environment. If at some point we believe additional inflation protection is needed, we have identified “hard-asset” type investments in materials and energy we could quickly move into.


We know another COVID-19 induced lockdown does not need to threaten economic growth as long as governments are willing to fund consumer spending. The greatest concern for future growth seems to be an overshoot in interest rates by central banks, which would curb consumer spending and potentially threaten real estate prices and elevate the risk rating of some government bonds. Central bankers seem well attuned to this concern and have stated they would let inflation run “hot” before moving on rates. While there is much to monitor, solid growth with continued market volatility is our expectation, and we maintain a strong bias for companies with pricing power and robust balance sheets.

We wish you good health, wealth and happiness in 2022.

Peter Hofstra, CFA, PhD

Peter Hofstra, CFA, PhD

Senior Vice-President and Senior Portfolio Manager

Peter Hofstra joined CI Global Asset Management in July 2017 as Senior Portfolio Manager. Peter brings to the team a depth of experience in both investment management and company management. Immediately prior to joining CI, Mr. Hofstra was Chief Investment Officer and Managing Director of Investment Research at Manitou Investment Management, a firm that focuses on private client and institutional money management. He was also a co-founder of a clean technology investment LP, which was acquired by Manitou. Prior to that, Mr. Hofstra was a portfolio manager at a large mutual fund company where he co-managed a U.S. equity fund and was lead manager of a science and technology fund. He has a B.Sc. in Chemistry and a PhD in Engineering Physics. Before joining the investment industry, he spent eight years with a technology firm, initially serving as a Senior Scientist and eventually becoming the Vice-President of Research and Development reporting directly to the CEO. Mr. Hofstra holds the Chartered Financial Analyst (CFA) designation.




This document is provided as a general source of information and should not be considered personal, legal, accounting, tax or investment advice, or construed as an endorsement or recommendation of any entity or security discussed. Every effort has been made to ensure that the material contained in this document is accurate at the time of publication. Market conditions may change which may impact the information contained in this document. All charts and illustrations in this document are for illustrative purposes only. They are not intended to predict or project investment results. Individuals should seek the advice of professionals, as appropriate, regarding any particular investment. Investors should consult their professional advisors prior to implementing any changes to their investment strategies.


The opinions expressed in the communication are solely those of the author(s) and are not to be used or construed as investment advice or as an endorsement or recommendation of any entity or security discussed.


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Published January 12, 2022