How advisors can approach the market in 2022

Next year could be a frustrating one for investors accustomed to a market that only goes up, but there will be opportunities for stock pickers with cash on hand to take advantage of the volatility, experts said Thursday at an industry event.

Stéfane Marion, chief economist and strategist at National Bank of Canada, and Lori Calvasina, managing director and head of U.S. equity strategy at RBC Capital Markets, offered their market outlooks for the year ahead at the Portfolio Management Association of Canada’s national conference.

Marion suggested advisors approach 2021 “carefully, because it’s going to be frustrating.”

“The way the yield curve shapes up and [the way] expectations move, it’s going to be really interesting,” he said during a Q&A session. “We have a slight overweight of cash right now that we’re willing to deploy once we get over this fifth-wave Covid speed bump.”

Despite a strong 2021 for equities, Marion suggested proceeding with caution. The S&P 500 is up 25.25% year to date, while the S&P/TSX 60 index is up 26.10%.

“As we approach 2022, there’s a way to not go with the crowd. You can differentiate because it’s still an uncertain world. But expect a little more volatility,” he said.

Calvasina said she’s emphasizing “balance” and “patience.”

“Even though I’ve talked about these wild swings [in the market], I don’t actually recommend that everybody try to chase every little swing,” she said. “You need to be aware of them. You need to be prepared for them. I don’t think you need to panic over them.”

Calvasina, who is based in the U.S., said she started 2021 “completely overweight” in cyclical and value stocks, mostly small-caps, financials, energy and materials.

“In August, we dialed down the cyclicality. We pulled that materials overweight off and we added tech. We still have that value tilt now, which we think is going to get us through the next few quarters,” she said.

Her team shifted some weighting to tech “even though we know it’s early [and] don’t have a ton of conviction in the exact timing that this trade is going to flip,” Calvasina said.