CIO Insights 1Q22: A Divergent World


DBS CIO Hou Wey Fook presents why we advocate for portfolios to stay invested amid divergent markets and the Fed's policy tightening
Chief Investment Office16 Dec 2021
  • Resilient earnings growth to support momentum in equities despite the Fed's policy tightening
  • Big Tech to continue leading the way; Health Care and Financials are also favoured
  • Prefer equities over bonds amid negative real yields; within equities, stay Overweight US and Europe
  • The next tech leap to the Metaverse will benefit I.D.E.A. companies
  • Income generators include BBB/BB-rated Asian credits & dividend yielding equities
Photo credit: Unsplash


Dear valued clients,

2021 was again a year of stark contrast in performance across world markets. For example, global equities (+17%) continued to outclass bonds (-5%) by a huge margin, and within the equity asset class, Developed Markets (+20%) outstripped Emerging Markets (-4%). This divergence is also reflected in US Growth stocks recording a 31% annualised return, far outstripping Value stocks at 12%, over the past five years.

Will the equity uptrend continue and trade in such a bifurcated manner?

Notwithstanding concerns over the start-stop policy response of countries to the pandemic, the Fed’s taper, as well as the elevated US equity market, we advocate for portfolios to stay invested.

Going into 2022, the previous drivers for our constructive view have not changed. First, the secular shift of the world to a digital economy will be a strong tailwind for earnings of Technology companies, and the US has an outsized representation in this sector. We also believe the Financials sector will be a beneficiary of interest rates normalising. Second, negative real yields from the surge in inflation will continue to favour equities over bonds.

As a result, the past trend of market bifurcation is likely to continue. And in this respect, our “barbell strategy” is well positioned to navigate and capture these opportunities.

In this vein, we introduce two themes this quarter that are well represented on the growth end of our barbell portfolio, namely the Metaverse and Health Care.

Enjoy the read and I wish you an exciting and profitable year of investing!


Hou Wey Fook, CFA
Chief Investment Officer


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