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Q1 2022 Wealth Management Strategy

The identification of the COVID-19 Omicron variant in November initially rocked the financial markets. While there is uncertainty ahead, it is likely that the arrival of  Omicron may extend the distortions of the economy associated with COVID-19, such as a rise in goods spending at the expense of services. However, Citi analysts believe that with greater international coordination, industry experience and government preparation, a significant new variant is unlikely to send the world economy into a new recession.

Global GDP gains are ongoing but decelerating. While Citi analysts expect global equity returns in the high single-digits over the year ahead, returns are moderating and certain global risks have increased. The Fed announced the start of tapering in November and indicated in December that the pace would be doubled to US$30bn/mo, with rate hike likely commencing by mid-2022. The more hawkish Fed is likely to introduce greater uncertainties and volatility in 2022 and beyond.

As such, Citi analysts are shifting focus towards less cyclical, high quality assets. As we retain our long-standing overweight to the healthcare sector, Citi analysts now believe an increased allocation to consumer staples – whether via dividend growers or by investing outright in quality consumer brands – could make sense in portfolios that had previously been tilted towards early-cycle performers.