As investors reposition their portfolio for the new year, investment analysts have said that staking in cyclical and high dividend-yielding stocks will pay off in the long run.
They also encouraged investors to focus on value stocks in their investment strategy, saying that they deliver superior returns.
In a report titled “Investment Strategy Outlook for 2022″, analysts at Afrinvest Asset Management advocated allocation of up to 20 per cent of asset portfolio to equities, while 30 per cent should be allocated to bonds and other low-risk asset classes each during the year.
They also believe that 10 per cent allocation to commodities and money market instruments would be ideal.
They stated: “We’ve seen cyclicality play out first-hand in many areas of the stock market in 2021. We expect the trend to be sustained as economic activities are expected to pick up faster as pandemic induced constraints fade out in 2022.
“Most economies will stay positive, hence, investing in cyclical stocks like consumer goods, industrial goods, financial services, manufacturing, real estate & construction and ICT technology, will deliver positive returns.
“The market will present drawdown opportunities that can be taken advantage of. Growth stocks are desirable for defensiveness; however, value stocks deliver superior returns.
“A combination of high dividend yielding and fundamentally strong stocks in the ICT, industrial sector and Consumer good sector could keep investors afloat amidst a major bearish market.”
In his projection for the stock market in 2022, Simon Kitchen, Managing Director, Macro-Strategy at EFG Hermes, said: “We don’t expect strong market performance in 2022; foreigners are waiting for improvements in the foreign exchange (FX) market, and local institutions are unwilling or unable to increase equity exposure. Investors should instead focus on yield, buying stocks with high yields or with a high chance of future yield growth.”