As we bring another year to a close, we will see much commentary around what ASX shares have in store for 2022 and beyond.
But it's extremely rare that any report or analyst would be courageous enough to put a number on their prediction.
This is why the outlook report released this week by Sydney's Evergreen Consultants stands out.
The investment consulting firm reckons ASX and global shares will continue to outperform other asset types, not just next year, but for the next decade.
"While higher inflation has traditionally provided a case to lift equity risk premia, we have decided to retain our estimate for the Australian equity long-term ERP [equity risk premium]," said Evergreen Consultants chief Angela Ashton.
"We believe that the impact of financial repression, where nominal rates are kept relatively low, will see investors continue to favour equities."
ASX small caps better than global shares
Based on the ERP not changing, the report forecast that ASX shares would grow 7.75% per annum in the long term, with annualised volatility of 13.5%.
The prospects for small companies on the ASX are even better, with a return of 8.65% per annum, with annualised volatility of 17%.
That beats global shares, which is forecast for growth of 8.05% per annum with 14% volatility.
Ashton admitted the current environment is "running hot" with inflation, especially in the US and some parts of Europe.
"But as supply chain disruptions slowly fade, we expect these elevated price pressures to abate by the end of 2022," she said.
"Over the longer term, we anticipate that the forces of innovation and technological change will prevent much larger and sustained rises to the general price level."
Evergreen now predicts inflation will run at 2.25%.
"We note that 2.25% is within the RBA's target inflation band and that our volatility projection is close to, but above, levels experienced in the five years prior to the COVID-19 breakout."
End of free money
According to T Rowe Price Group Inc (NASDAQ: TROW) head of Australian equity Randal Jenneke, in the new year, investors will have to deal with the end of 'free money'.
"The withdrawal by governments and central banks of massive post-pandemic stimulus is set to become a significant headwind for global growth in 2022," he said.
"We believe we are entering a new phase of the market cycle — the 'deceleration' phase characterised by slowing economic and earnings growth."
He added it would be best to stick with "quality" companies and expect lower returns than previous years.
"We are less keen on domestic and global cyclical names that have outperformed in 2021," Jenneke said.
"Reflecting our near-term caution, we have increasingly favoured quality and the more defensive areas of the market such as healthcare, staples, and utilities."
