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Global Investment Services - Perspectives 2022

Global investment outlook – A new era of global liquidity

As the global community looks forward to a far more prosperous health backdrop, we have now reached the fulcrum of global liquidity. Having enjoyed an extended period of 15 years of its abundance and its powerful positive multiplying effects, we are at the dawn of a new era of global liquidity, and are at an inflection point in the global investment ecosystem. This will be defined by changes to several long-term forces, social imbalances and decade-long low yields, where opportunities exist for patient capital, and disciplined and discerning investment thinking is key.

In our latest edition of Perspectives, we examined some of the key drivers we believe will shape risk and opportunity globally. Crucial to all of this is being able to make peace with higher global interest rates and the implications of a new global geopolitical framework.


Accelerated growth in health innovation and cost-efficient access is creating long-term value for businesses that are addressing the evolving demands on healthcare systems globally, supported by continued strong levels of investment. We expect to see further advances in drug, personalised health treatments, and solutions to rare diseases. With global listed biotechnology companies experiencing material declines in valuations since Feb 2021 and global pharmaceutical companies in search for new drug pathways, the medium-term outlook is constructive. In addition, we expect healthcare models to shift from surrounding the provider to more patient-oriented outcomes from a health, access and cost perspective, with the US at the forefront of this transformation.

The global economy

Divergence will define the environment ahead, with softer inflation and looser monetary policy stance from South Asian central banks, China and Japan contrasting the tightening monetary policies in motion by the US, UK, NZ and Australia. Meanwhile, non-Asia emerging markets have already significantly raised interest rates in 2021. With fiscal and monetary stimulus largely withdrawn post pandemic, many countries are returning to their 2019 state.

We also expect:

  • in Australia, a return to moderate growth due to low business investment and productivity and not seizing the COVID-19 crisis to implement positive structural change

  • material interest rate differentials to return in favour of the US in developed markets

  • short-dated interest rates in Australia to peak close to 2%, mostly due to low wage growth and inflation compared to the US, low business investment, the lack of positive structural reform and slowing housing market momentum

  • in transitioning to tighter global credit conditions, there will be higher overall absolute return potential for select credit opportunities

  • ongoing USD strength in the first half of 2022, as both markets and the US Federal Reserve adjust to the permanence of price increases and higher US real yields

  • the AUD to stay in the medium-term range of 0.71-0.76 against the US Dollar in 2022 due to milder interest rate policy and underappreciation of the impact of China’s deceleration, offset in part by price stabilisation of core export commodities

Market leadership and growth sustainability will be different for years ahead

For some time, equity markets have benefited from acceleration in business earnings and equity valuations. We are now transitioning to a world defined by earnings tailwinds in selective sectors and broad valuation headwinds. We believe that opportunities ahead will be defined by sustainable quality growth and justifiable valuations driven by a highly selective framework of sector, theme, and business model differentiation. We welcome this return to a more normal investment environment, given that it necessitates disciplined fundamental investing and differentiated returns generated by superior investment selection.

We are entering a new environment where technology, innovation, adaptable business models and structural drivers are ingredients of success. This should drive an additional set of opportunities even in traditional industries and demand for high-performance computing will materially increase.

Climate change is a defining challenge of this decade and decarbonisation needs to be met with a practical transition plan. As such, one of our primary focuses is on enablers who are the greatest beneficiaries of the first phase of the energy transition.

Australian and global real estate

Over the last year, housing prices rose 20% in the US and Australia, and 10% in the UK and Europe. We are now at a critical juncture in different parts of the world, defined by the chronic lack of housing availability (in countries like the US) and affordability (in countries like Australia).

In the US, a decade of under-development has created a 20-year low in home inventory at a time when the US consumer has never been in better financial shape and rental vacancies are at their lowest since 1984. We believe that attractive equity and debt-based opportunities in the broader housing-related markets remain underappreciated.

In Australia, a long soft landing is ahead as we transition to a more mature phase of the housing market. Favourable drivers will gradually reverse due to affordability, debt to income levels and rising interest rates. We believe that internal migration to affordable cities will continue, as will rising rental rates and the importance of securing land as construction costs continue to rise.

This article references Perspectives – an annual research publication on the global macroeconomic outlook. It is produced for clients of Westpac Private Bank’s Global Investment Services.

About the author  

George Toubia is the Chief Investment Officer for Westpac Private Wealth, having joined Westpac Group in 2011. George identifies themes in global markets that are empowered by structural drivers, thereby seeking to uncover the investment opportunities and beneficiaries of those themes before they become widely recognised. He also leads a team of six investment analysts who together form the Private Wealth Investment Team. He is responsible for sharing insights and actionable investment ideas with wholesale and sophisticated high net worth clients of Westpac Private Wealth.

Things you should know

The information in this publication is current as at June 2022 unless stated otherwise. This information is only for distribution in Australia and should not be forwarded to any other person. The Global Investment Service (GIS) is offered by GIS Private Nominees Pty Limited (GISPN) ABN 93 000 626 264 AFSL 233727. Private Wealth is a division of the Westpac Banking Corporation ABN 33 007 457 141 AFSL and Australian credit licence 233714. Material contained in this publication is an overview or summary only. Information in this publication that has been provided by third parties has not been independently verified and the Westpac Group is not in any way responsible for such information. While such material is published with necessary permission, no company in the Westpac Group accepts any responsibility for the accuracy or completeness of, or endorses any such material. Except where contrary to law, we intend by this notice to exclude liability for this material. Whilst we have used every effort to ensure that the assumptions on which the projections are based are reasonable, the projections may be based on incorrect assumptions or may not take into account known or unknown risks and uncertainties. Past performance is not a reliable indicator of future performance. The information contained in this material does not constitute a recommendation amounting to financial product advice, offer, a solicitation of an offer, or an inducement to subscribe for, purchase or sell any financial instrument or to enter a legally binding contract. The information in this publication does not take into account your personal objectives, financial situation or needs. You should consider its appropriateness, having regard to these factors, before acting on it.