It’s mid-November, and, like clockwork, the first forecast for the upcoming year has landed in my inbox. This will be the first of many prognostications, not to mention the endless best and worst of 2021 lists to come.

Naturally, we try to be selective.

To that end, we’re presenting the hi-lights of the TD Global Strategy team’s global outlook for 2022, which carries the title, The Year of Living Dangerously.


Global Macro: Rebalancing risks loom large in 2022.

We still believe the risks are biased to the downside for inflation and growth.

This should see less tightening delivered than priced in right now, but it will be a close game of chicken into mid-2022 between market fears and macro facts.

Global Rates: Global rates will be a function of the post COVID recovery and inflation dynamics as well as the unwind of central bank accommodation.

We forecast rising long-end rates but believe that the front end is too aggressive in pricing in hikes.

G10 Foreign Exchange: Expect a mixed set of drivers reflecting divergence across growth, central banks, terms of trade, and valuations.

Our forecast of a patient Fed, decent global growth, and US 2-year and 10-year treasury steepeners argue for a weaker U.S. Dollar to start 2022.

Japanese Yen and Swiss France are the exceptions given reflation while the Euro falls in between.

Emerging Markets (EM): Funding gaps will present headwinds to EM performance, with Latin America seemingly on the weakest footing.

The ultimate timing for Fed hikes is likely the largest driver as to whether EM can outperform current pricing.

Commodities: The industrial and energy complex is set to disappoint many investors who believe that the bull market will run uninterrupted.

We expect modest declines, though winter could give energy some last support. Precious metals will be led by the Fed, but we see platinum and palladium outperforming.

Portfolio Strategy: Equity and credit allocations remain key for balancing performance and volatility, while issuance patterns continue to be driven by environment, social and governance (ESG).

We prefer European exposure, but U.S. Dollar investments outside of this. We also see relatively more value in USD Materials and European Industrials and Consumer Staples.


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