In terms of the sector, cyclical industries like finance and energy have performed very well, with energy being the best performing sector in the world. Still, tech stocks have remained largely intact in strength as they ranked second in sector performance, though this is being tested with the increasing likelihood of higher interest rates through 2022.
Geographically, 2021 was a story of two halves, according to Kanagasingam. For the first six months, Canada was among the best stock markets for investors in developed markets. But with the tailwind of the energy sector weakening, the Canadian stock market lost some of its momentum in the second half of the year.
«So far, Canadian stock benchmarks have outperformed international stocks, although they still lagged slightly behind US indices,» he says. “Even from an ETF flow perspective, we’ve seen noticeable activity in non-US aligned stocks, especially Canadian stocks. With over-the-top valuations of US stocks and fears of rising interest rates, investors are starting to diversify into other regions, and I think this theme will continue through 2022. «
With decades of inflation data reported in recent months, as well as ongoing supply chain bottlenecks, there is little doubt among investors that rising prices will continue. Against this background, according to Kanagasingam, investors are increasingly paying attention to commodities such as energy and gold as inflation protection in their portfolios.
On the equity side, ETF investors have taken a close look at real assets, especially REITs and infrastructure, that can benefit from the pricing power of their underlying physical assets. Bond ETF investors, meanwhile, have shown interest in TIPS and real return bonds, which after several years of calm, raised more than $ 350 million in net flows in 2021.