Ladies and gentlemen, welcome to the investment outlook for the year 2022. The year 2021's drawing to a close, so now it's time to review our economic forecasts and our outlook for asset class returns going into next year. Where do we stand? From a macroeconomic perspective, if you take a look at where we stand from a GDP perspective globally, you can see that the pandemic year, 2020, is behind us. Most economies have now gone beyond where we were before the pandemic hit, so GDP growth rates have caught up with that position in 2019. Question is, how much longer will it take until we are back at trend growth rates? That is the place we would have been had the pandemic year not hit us. That's still going to take some time. Some economies further along the road on being back to pre-pandemic growth levels than others. One thing you'll notice on the chart here on the left-hand side is that China is markedly growing slower than it was before the COVID-19 pandemic. Growth rates in most regions remain, though, above pre-pandemic trends, and also in most quarters. That is for right now. It's of course, very unlikely that this recovery speed continues. We expect the growth rates in 2022 to start to normalize. Now, when we take a look at forward-looking indicators, hard economic data, sentiment data in developed markets as well as in emerging markets, what you can see is we are certainly past the peak. The recovery out of COVID-19 was fast and strong. We are now starting to see a slowdown of this strength. You can see here the economic momentum on the left-hand side. Soft data has started to weaken as hard data, but hard data is starting to turn somewhat here in developed markets. It was very fast growth, slowing down and now starting to stabilize again. In the emerging markets, the slowdown came first, mainly because the recovery out of COVID also came first. What's notable, though, is that the slowdown went from slowing growth actually to slowing economic momentum, and that is more of a slowdown in the growth rates in EM, basically, than what we're looking at in developed markets. That's for growth. The next question, if you wanna know where rates are going, is what's happening with inflation. Inflation, of course, has been a big topic. Is it transitory? How transitory is transitory? Is it six months? Is it two years? Will two years of transitory inflation lead into real inflation as inflation expectations get de-anchored? Well, this is the picture of what we've seen so far in inflation and also what our forecasts are for inflation going forward. You can see the U.S. peaking at around 6% and then coming down lower to normal rates by Q4 2022. The rest of the world also basically already having peaked in terms of what we expect for inflation. From here on out, we also, especially for those supply chain related inflationary pressures, expect to see an easing as we move forward into 2022. Maybe let's take a closer look because inflation is a big topic. It's in the press every day. When it's in the press every day, it starts to have an impact on corporate activity because CFOs, corporate executives, business managers, we all read these headlines every day. It means that inflation expectations can get de-anchored if for a long period of time, we are all cajoled into the idea that inflation is rampant. It starts to impact our spending at our corporate spending patterns. We have long-term structural drivers for inflation as well as deflation. We feel that these haven't really changed all that much. If you take a look at what really drives either inflationary or deflationary pressures over the past 10, 20 years, globalization will have been a big deflationary theme. Here's one thing that's changed somewhat because this globalization is de-globalizing as companies are trying to get their supply chains closer to the source of production. This is now a new inflationary trend. Climate change and climate protection measures also inflationary as we start to spend more on power and power generation. At least in the short term, this will be inflationary. Longer term, of course, if you mean that you're getting energy prices for free, i.e. solar, wind, this would be deflationary. While we have to invest in order to get our grids to be fully reliable on renewables, this is an inflationary trend. What remains clearly deflationary is digitalization. Digitalization is akin to productivity gains, lowering the cost of production and also increasing margins, making it possible for prices to come lower. Deflationary remains deflationary. Demographics also squarely still a deflationary trend. You just need to look at Japan to see the effects of demographics on inflation. Wage growth, well, we see some movements there. Wages are starting to come up. In the U.S., we've seen wages rise by as much as 4 or 5%. The thing is, if consumer price inflation is rising 6% and wages are up 4%, means people are actually earning less now than they did before. That actually still hasn't turned into an inflationary driver. Under investments in commodity capacities. This is very important related to the energy transition. We're no longer investing in coal. We're not investing in oil. Very few are investing in nuclear. Although I have a feeling that might start to change. The fact that no one invests in this old energy production means that then prices of things like oil actually remain supported because supply keeps coming lower. Also, in a renewable world, it's not very likely that a shale company is going to be able to get new big loans. Banks aren't willing to finance things that are not environmentally sustainable. Now fear of markets and central banks are that short-term drivers can become structural. Again, this is when we all read about inflation every day, we start thinking it's real, and we start adapting our behavior. That causes real inflation. This is something where we see the risks start to rise, because the longer that these inflationary pressures that we have are, or transient pressures that we have are, lengthy in time, the more that the risk rises here. What we're talking about here are the short-term effects. What everyone refers to as these transient effects. These are all supply chain related issues coming out of COVID-19. It's normal that if an economy was switched off, economy that was running just-in-time business processes was switched off because of COVID-19 lockdowns, suddenly gets turned back on with huge amounts of fiscal and monetary stimulus, that all of a sudden you have supply chain issues. We've been suffering supply chain issues for a while now. Be it in semiconductors, be it in shipping, be it in commodities. There have been a lot of elements of the supply chain that have been constrained and that have caused price inflation. These are temporary. We will work our way through this. That is clear. Question is, how quickly do we work our way through this, and do we work our way through before everyone starts hiking prices in order to make up for the rising input cost inflation that they have? Our economic scenario going into 2022 is that it's going to be harder, better, tougher, greener. What does that mean? It means that global growth is going to be good. It's gonna be good growth, but it's post-peak. It's not as strong as what we've seen in 2021. Inflation's going to start normalizing after the winter, and fiscal support is going to start abating. That's also going to be relevant to watch on. That's the global picture. In the U.S., similar. We have growth slowing to pre-pandemic levels. Inflation also normalizing towards the summer levels. There we actually have continued fiscal support because as you know, we have infrastructure packages, the boots on the ground, shovels in the dirt type infrastructure in the beginning, but then also more social infrastructure that's coming in a second package from the Biden administration. In the Eurozone, we have slowing growth rates, but higher than the pre-crisis levels. Inflation also there starting to abate. We also have a recovery fund, so we still do have some support in terms of fiscal stimulus. China, growth rates here are slowing, and below trend growth. Fiscal and monetary policy, though, will likely start to become supportive in China because that economy has slowed too fast, too hard. We expect the Chinese to start opening the taps again and stimulating their own economy. Now with central banks, we expect to see that they're gonna patiently start to taper. That is reducing the amount of purchasing that they do. Taper does not mean tighten, however. Don't expect to see rates coming up in any hurry. Just expect to see that you have central bank purchasing of paper start to slow down. Now, what are the outliers? What could derail this on both sides? A negative as well as positive derailment. On the negative side, of course, it could be that these supply side shortages actually intensify because we go into new rounds of lockdowns and we have real chaos in supply chains. That would be a negative trigger. You could also have a situation where central banks start to lose their patience with inflation and start to hike interest rates too quickly, choking economic growth. That would be negative scenario. The positive triggers, of course, is that consumption is great. Consumers are spending a lot more than even we expect because the savings rate is high. The demand increases as bottlenecks also start to relax, so supply chains ease. That you have good amount of fiscal stimulus in the U.S. as well as in the Eurozone. That China continues to recover, that it stimulates and effectively stimulates, and that central banks are very patient and don't raise rates. Both of these outlier scenarios we see with relatively low probabilities. Our baseline is the middle. Harder, better, tougher, greener. Now what does that mean? Why harder? What does harder mean? Well, harder, very much geopolitical. China's growth is going to be below potential. That's the economic side. We also have imbalances in the Chinese economy which are here to stay. Like high debt levels, dependence on the real estate sector, slowing demographics, and again, geopolitics. China has geopolitical aspirations. They're not likely going to go away with COVID-19. Quite the opposite. We expect to see China increasingly become assertive geopolitically. Why better? Well, better because from a macro perspective, we expect the economy, global economy, to start functioning more effectively. A better balance between demand and supply, which normalizes inflation. A normalization of inflation would of course be good. Of course, we expect COVID-19 related uncertainty to start wane. We start to expect COVID-19 to be under control. That would of course be better given the current situation with new lockdowns in the Eurozone. That of course is somewhat of a risk. Now, why tougher? Well, tougher in 2022 because even if the uncertainty around COVID-19 diminishes, the legacy of the pandemic is gonna start being felt. Keep in mind that many nation states still have support schemes for those affected by COVID-19. Whether that means that you can't be kicked out of an apartment even though you can't afford the rent, whether it means that you have extended unemployment benefits. All sorts of support measures for all parts of the economy, also for corporates, tax breaks, and the like, are all gonna start being diminished because we now need to turn from supporting people, helping people because of the pandemic, to paying for all these measures. Yes, that's right. At one point, we need to pay for all this. The debt needs to come down, and that's why we expect it to be tougher. The geopolitical language, taxation, these topics are gonna be tough. They're gonna be with us starting in 2022, even if 2022 might not be the year when we see taxes and other mitigating measures to be implemented. Greener. Well, I think we all know why greener. COP26 just been concluded. It's clear that all nations around the world from the U.S. to China, Europe, Africa, everyone is committed to a greener future and to reducing greenhouse gas emissions. Enormous amounts of money are going to be spent on this green transition. This can create opportunities. It can also create dislocations in energy markets in the way that we power the grids. This is something to keep an eye out on. The green part of 2022 is certainly going to be a central investment theme for us. The macro themes: inflation normalization, the COVID legacy, China's moving forces, and from a healthcare pandemic to a climate care pandemic, climate urgency. These are our macro themes for 2022. Let me run you through exactly what they look like. On the theme of inflation normalization, the IMF is estimating that for the advanced economies on average, headline inflation will peak in the final months of 2021 and then starts to decline to about 2% by mid-2022. Higher commodity prices and transport costs are currently adding about 1.5% to G20 CPI inflation. It's very key to see what happens here in terms of commodity prices. The green theme is going to be an issue here because a lot of this inflation is coming through the transition to renewable sources of energy. We continue to expect that inflation is gonna come down from its high levels, though, and that central banks can then gradually reduce their monetary policy. This is the important part for our macro outlook. A normalization of inflation will make it possible for central banks to be patient, i.e., real rates are likely going to remain low. Even though they rise, they will remain low in historical perspectives. That's very important for your expectations on asset class returns. Here you see it. Real rates can rise as inflation starts to normalize, but real rates are currently in negative territory. What does that mean? It means they continue to be invested in growth stocks. IT and healthcare will continue to do well. Also take a look at staples. We think that staples have been beaten down in this year, and they are likely going to see a recovery. There are also companies that very often can pass on higher input cost inflation and keep their margins high. Within mixed income, we expect nominal yields to be higher and see gradually, slowly rising real rates. This is going to be a very slow, gentle process on rates. Theme Two: The Long COVID-19 Legacy. Let's take a look at what we mean by the long legacy once again. High debt piles. That's definitely the key takeaway that we all know. Here you can see government debt for 2019, 2020, and 2021. You can see that even in such a short horizon, our debt piles have risen quite a bit across economies. From the developed to the emerging markets, our debt piles are high. In fact, 97% of GDP, that's 13 percentage points higher for global government debt. Public debt rose more in developed markets than emerging markets, but also emerging markets have an issue. A global minimum corporate tax of 15% is one of the ways that you can start addressing these debt piles, but we're not going to be able to tax our way out of this all the way. We're gonna have to grow our way out, and we're gonna have to inflate our way out as well. Expect to see all three of these be the ways that governments expect to get their way out of these debt piles. The long COVID legacy, though, also means fiscal support is likely going to no longer be as strong as it has been in the past, and distributions also to the public are going to be lower than they have been in the past. Corporations and private individuals have become used to being supported by the government and by central banks. This is no longer going to be possible, not in the full amount as we've seen over the past year. We are going to have to lift our own way out of this mess. Now let's take a look at corporate taxes. They vary a lot across OECD countries. Of course, these are the stated taxes. We all know that the stated tax isn't necessarily what you pay. I'm not sure how many U.S. corporations are actually paying 25.8% at the moment. Very likely, there are ways to pay less. Nonetheless, what you're likely going to see is that the minimum tax rate, these discussions around a minimum tax rate do bring in more tax money to government coffers. Governments need some filling up. What does this mean? Well, in terms as an equity investor, we'd say buy quality stocks, quality companies with strong earnings, strong balance sheets, because these are companies that might have a bit of a hit if you see taxes come up, but they will take a short-term hit, as the market looks through this and sees, of course, the quality earnings growth as being more appealing than any, you know, adjustment for the tax rates. That's why quality stock's important in terms of an allocation. Tax hikes, of course, never help, but if you have a quality stock, then you know that companies can work around and they can adjust their cost base to make up for any increase in taxes. Within fixed income, countries with a stronger fiscal position, quite obviously, also here, quality is the term. It's just credit quality you need to look at. Companies which are less levered will offer a good quality and will outperform in a post-COVID world. Theme Three: China's Moving Forces. Well, look, China's GDP as a share of global GDP keeps rising. It'll soon be around 20% of the world's GDP. This is very important. It means that we need to understand what's happening in China in order to understand how to do asset allocation. Now, the issues in China are, as we all know, property and construction make up a very big part of GDP. That needs to be managed. The Chinese government knows this as well, and they're managing this transition. We believe they're managing it in an effective way, and they'll be able to do so without any larger dislocations. Other domestic policies, how they deal with topics like, for example, gambling, private education, data, who owns data. These topics are more political in nature. They're a bit more risky, and there we need to monitor how China starts to deal with its own domestic economy and what type of regulations and restrictions it puts on its own corporations. China, we expect, will start stimulating its economy fairly soon. As you can see, the credit impulse in China has contracted dramatically. They boomed out of the COVID-19 lockdowns and led the global growth rates, led the recovery, first economy to recover out of the COVID-19 pandemic. Then they tightened too quickly, and I think what they've noticed now is that they've stepped on the brakes too hard. What's likely going to happen? In order to support this economy, now we are likely going to see easing of credit conditions, more stimulus for the Chinese economy. That means that Asian high yield credit and local debt could be a place where there are opportunities in fixed income. In terms of equities, well, we don't think you can really avoid emerging market equities. You need an allocation to emerging markets. That's why, we would selectively look to find companies that offer good value also in emerging markets. From health to a climate urgency, as mentioned before, the transition from fossil fuels to renewable fuels in our power production and energy infrastructure is a big topic for how economies are managed. There's an awareness around climate change policies. We all realize that we're moving in this direction. It's policymakers, it's the public, it's corporates. It's everyone is involved now and pushing in the same direction. The direction of travel is clear. The question is, how do we get to net zero by 2025? It's a very ambitious target that many countries have set for themselves. Not all of us have 2025 as a target, but the bulk of developed nations do. How do we get there in terms of CO₂ emissions? Well, there are going to be many measures that need to be taken, but very clearly we are removing coal, we are removing fossil fuels from power generation, and we're relying increasingly on solar and wind, the two accepted internationally forms of renewable energy. It means that much will need to be invested. In value terms, 3x global GDP will need to be invested between now and 2025 in order to reach that net zero. There's a large amount of money that needs to go into energy infrastructure. What you need to keep in mind is right now, technology also needs to develop because at this point, we can build solar endlessly. We can keep building it. The problem is, if the sun doesn't shine, it doesn't produce any power. When it does produce, well, we need to feed it into the grids because we can't store it efficiently. Storage is the key. We need to develop technologies around storage in order for us to really be able to rely on intermittent power, providers like renewables. Until we figure that out, we need other forms of power. We've already decided that coal is not gonna be one of them. We need to replace coal with something else. We need to replace coal with something that can actually reliably provide power. At the moment, it's gas. About 60% of our power generation is still from gas. You can do gas in different ways. You can do gas in a semi-green way. Clearly, that's also not the end goal. The end goal would have to be fully renewable. In order to get there, we need more technology in power storage. If we move too fast before the technology, we risk ourselves of a spike in energy prices and an energy crisis, especially in periods like a cold winter if we're short of power production. Take a look at the CO₂ emissions, and where you see here the global stock of CO₂, who are the emitters and who needs to make the first moves. Well, in terms of top-down investment implications across asset classes, as mentioned before, gain exposure to those technology providers that can be part of the solution to providing clean energy. Even exposure to old energy, oil and especially metals, industrial metals, like copper, like aluminum, are still important because they are still necessary in order to make this transition to an ESG world. You know, don't forget what you need to build a solar panel. You still need industrial metals, and you also need industrial metals to build a windmill. These are parts of the equity market and the commodities market that actually will be supported. In fixed income, issuance of green bonds, and for those providers who can find us a way to invest in emerging market debt sustainably, they will be beneficiaries because all allocators are looking in this direction, sustainable investing. What are the key takeaways? Well, the key takeaways for us are, don't expect any stagflation. While the economy is slowing down, yes, do not let the press scare you. It's not slowing down that dramatically. In fact, growth continues at a healthy clip, and we are not concerned about growth. The growth will not be as fast as it's been coming out of COVID-19, but no one should expect growth at those levels. Expect growth more at trends. Now, inflation is not likely going to stay as high as we have it now. Expect inflation to normalize. Yes, supply chain issues have been with us longer than we expected, but supply chain issues will not be with us forever. At some point, we work our way through and those issues are mitigated. Keep in mind that many of the structural trends that we have, notably digitalization and demographics, remain very deflationary, and they balance out other new inflationary trends that we see. We do not expect to have any real pressures on inflation. If anything, there likely won't be enough inflation. Stagflation, definitely not an issue. In terms of asset class allocation, we still prefer equities. There really is no alternative. TINA is still your best friend. Invest in equities because they provide inflation protection. They also, will give you good exposure to the corporate earnings and growth that we see in corporate activity. Equities are a great way to get some returns from capital markets, while other asset classes will provide you smooth earners in terms of volatility, namely for us, an allocation to gold, but also fixed income, which can provide convexity for your portfolios. In terms of other fixed income asset classes, we remain underweight investment grade because we don't see spreads as appealing there. In terms of fixed income allocation, really EM debt being the only area where we see investors compensated for the risk they're taking. Stay overweight equities, underweight debt, and neutral on the rest of the allocation. With that, I'd like to thank you very much for your time and open up now to questions from the audience. I'll be taking a look here at my screen for any questions that come in to the chat room. Omicron is the first question. Very clear. Yes. Obviously, Omicron is a big risk factor that we've seen right now. It's something that we haven't had much time to assess. Honestly, we would need at least a three-week period monitoring Omicron to understand whether the infection rates are going to have an impact on the death rates and hospitalizations. For us as economists and strategists that are invested in markets, these hospitalizations are the key. Because if hospitalizations start to become an issue, that's when countries look into lockdown measures. Before that, well, there's no need to lock down. If Omicron really is as asymptomatic as some people are claiming, then it shouldn't be a big issue. What you need to keep in mind is that most of the lockdowns, the temporary measures that have been mentioned so far, have been in the Eurozone where we're in winter. It's not just Omicron, it's also the normal flu, and it's also the Delta variant of COVID. There are many reasons why hospitalizations will be picking up in the winter months. We just need to make sure that capacity isn't an issue in hospitals, and then we should be able to make it through the European winter without much cause for alarm. In the U.S., you've heard that Biden has said that there's no need for new economic lockdowns. There it seems clear that the decision is to mass vaccinate and to boost and to carry the consequences. If people still get infected, they're still gonna get infected, hopefully not with severe symptoms because they're vaccinated. The way the countries deal with this pandemic also is going to have an impact on our GDP estimates. It's possible that we have to shave our Eurozone GDP estimates lower if these lockdowns remain in place. For countries like the U.S. and others that are loosening lockdown measures, you know, the economic trajectory does not change much. That's, for us anyway, the key. Yes, okay. Energy inflation is another question that's come. Look, for me, this is a very key topic because for years now, for decades now, companies have been holding back on investment. Clearly, because they needed to clean up their balance sheets, they came out of a situation with the commodity boom of very leveraged balance sheets. Many companies went close to bankrupt, and then prices collapsed. That was really a big issue for the commodity sector in general, whether we're talking about industrial metals or whether we're talking about oil. Then of course, you now have the ESG trend, which means that banks are no longer really willing to finance shale producers. Shale is no longer that marginal supplier that keeps prices capped. At the same time, again, you know, the deep sea oil production companies haven't been reinvesting, because they know that these are terminal assets. Longer term, they're not gonna be able to sell these fossil fuels. The project times are incredibly long. So which CFO right now is going to commit billions of his coffers to an asset that's terminal? Much rather reinvest the free cash flows from your oil production into a offshore winds or solar panel facility, or maybe even a lithium mine makes a lot more sense for the executives of energy companies. As we're no longer investing in fossil fuels, especially coal, but also oil, it means of course the supply goes down. When supply goes down, but demand actually continues to rise, you can guess what happens to prices. That's what's happening, because at the moment, the world is increasingly consuming more oil, not less oil, emerging markets in particular increasing their consumption of oil. Global consumption of oil is actually increasing by about 1 million barrels a day. That, of course, is something that runs counter to this decision or this will to reduce greenhouse gas emissions. We need to really manage this situation, so we don't have massive price spikes like we already saw when the wind over the Atlantic stopped blowing and the U.K. had no gas storage. What happens? Power prices went up 400%. Similar thing happened in Texas last winter. It was so cold in Texas, and Texas' energy grid is not connected to the rest of the U.S., that they had a problem because the windmills froze. When the windmills froze, they couldn't generate any electricity. Again, they're not connected to other states, so they couldn't import power. The move to renewable, even in a state like Texas, the home of oil, the Houston Oilers, was an issue. These are all dislocations that might cause real jitters in the markets and also for, you know, everyday people who are just trying to heat their homes in winter. These are stumbling blocks, potentially large stumbling blocks along the way to net zero. That's a big topic for me. We have maybe time for one last one. I see there have been a number of questions about how we go about reducing these giant debt piles. Look, I think I mentioned it in the presentation before. I think there's no one way to reduce our debt piles, but what's very clear is that central banks are going to be keen to take it from savers. If you like to hoard cash under your mattress or on a current account, you are going to be financing these debt repayments because governments are gonna be keen to let inflation run enough in order to inflate their way out of the debts. The part that they can't, because they can't let inflation just run rampant, the part that they can't make up with inflation, they're going to try and take from you in taxes, and they'll try and take it in wealth tax or corporate tax. The fact that there has been a discussion about unrealized capital gains tax in the U.S. should be signal enough about what they're willing to do in terms of taxes. Last but not least, we don't need to be purely pessimistic. The global economy is growing, so growth is good. Growth means more income taxes from corporations and more income taxes from earners. That's the way it's going to happen. It's going to take generations, though. Because neither the inflation, nor the growth, nor the taxes will be, you know, will be enforceable enough in a way to get this, debt down quickly. That means that for generations, this burden is gonna be hanging overhead when it comes to the needs to spend. There just won't be the capabilities for many governments to continue to spend. Expect a structural devaluation of your currency unless you happen to be based in a safe haven currency like the Swiss franc or the yen. All right. Ladies and gentlemen, thank you very much for your time and your questions. Please feel free to email in any further questions if I haven't been able to answer. With that, I wish you successful investing and thanks for investing with us.