In early December, we held a brief webinar to look back at markets in 2021, our expectations for the year ahead, and to introduce the Analyst Conviction List.

Equity markets had a phenomenal run in 2021, following on from an exceptional performance in 2020, post the Covid-related crash in March. Cantor Fitzgerald Ireland’s Chief Investment Officer, David Beaton stated that the stellar performance in European and US indices has been driven by accommodative central bank monetary policy, significant volumes of fiscal stimulus, as well as the vaccine rollout, which has facilitated the reopening of economies around the world, fuelling economic growth.

David argued that the challenge for central banks is to stimulate growth while also containing the inflation arising from that growth. Inflation is a hot topic in markets as we move into 2022, with central banks and the Federal Reserve in particular now becoming more hawkish as their original thoughts on inflation being transitory in nature are beginning to change. The Fed announced that it is accelerating the reduction of its monthly asset purchase programme, and is signalling as many as three rate hikes in 2022, to combat rising inflation. Meanwhile, the Bank of England has risen rates from 0.1% to 0.25% as the UK’s concerns over inflation grow. The ECB on the other hand is remaining more dovish, viewing inflation as transitory, and is likely to remain on the same trajectory into 2022, with no ECB rate hikes expected in 2022. The course of inflation is heavily dependent on the virus, with the new variants likely to play a significant role in determining inflation and growth this year.

Should the spread of the virus lead to further lockdowns, we are likely to see more inflationary pressures through supply chain disruptions, which continue to impact heavily on the surge in commodity prices we have experienced in 2021. On the topic of China and it’s property developers’ debt difficulties, global contagion is not a significant risk in his view. However, defaults by the likes of Evergrande or Sunac would have a significant impact on the Chinese economy, and that an aggressive slowdown in Chinese growth would have ramifications for global growth. On the area of corporate earnings, David outlined our view that corporate earnings will continue to grow in 2022 but that the growth rate will slow (the rate of growth in 2021 is coming from a low comparative base in 2020). Overall, the view is that despite caution in the short-term, we are constructive on risk assets moving into 2022 and on a medium to long-term basis.

Introducing Cantor Fitzgerald’s Analyst Conviction List, James Buckley (Senior Equity Research Analyst) shared insights on our very best stock ideas. The Analyst Conviction List is complied by our Equity Research team and is made up of 14 stocks that are rated as Buy. James highlighted the dynamic nature of the list and that not all stocks under our coverage make the cut. There is a focus on stocks that are global leaders in their sectors, while maintaining geographical and sector diversification. As ESG (Environmental, Social and Governance) and sustainability are becoming increasingly important in investment mandates, ESG screening is continually factored into the equity research process.

A key goal of this webinar was to share insights on the process in selecting names from the global stock universe. Members of our research team each took one stock and the thinking behind its selection:

• James Buckley talked through ASML, one of Europe’s largest companies and the world leader in semiconductor equipment manufacturing
• Senior Equity Analyst, Ian Hunter put Microsoft under the spotlight, highlighting the exceptional cash generation of the company which is fuelling its expansion through acquisitions.
• Finally, Brian Considine (Junior Equity Analyst) discussed Irish stock Hibernia REIT, which specialises in prime office real estate in Dublin city centre and is trading at an unwarranted discount to its net asset value relative to its peers.

The Q&A session focused on the weakness of the euro relative to the dollar and sterling, cryptocurrency volatility, mining stocks, and the relative undervaluation of European stocks relative to US stocks. If you wish to watch a recording of the webinar, please fill in your details here: https://cantorfitzgerald.ie/conviction-list/

Brian Considine is a Junior Research Analyst with Cantor Fitzgerald Ireland.