Despite omicron risks, Invesco’s top global strategist lists emerging markets — including China — as top 2022 investment picks

Invesco’s Kristina Hooper sees significant opportunities in regions shunned by a majority of investors.

Despite the new omicron wave, she lists emerging markets — including China — as 2022’s top places to put money to work.

“We always knew it would take longer for emerging markets to get populations vaccinated. But clearly there is a ramp up occurring, and it’s going to continue well into 2022,” the firm’s chief global market strategist told CNBC’s “Trading Nation” on Monday. “So, that means 2022 should be for emerging markets what 2021 was for developed markets in terms of participating in a more robust reopening of their economies.”

So far this year, the iShares MSCI Emerging Markets ETF, which tracks large and mid-sized publicly traded companies in developing regions, is dramatically underperforming the S&P 500. The ETF is off 6% so far this year while the S&P 500 is up 24%.

Hooper acknowledges investing abroad in places such as China takes courage.

“There’s this conventional wisdom that China is uninvestable. It is not uninvestable,” said Hooper, who’s particularly bullish on the country’s tech industry.

China’s lawmakers are in the midst of a major regulation crackdown as part of its “common prosperity” push. Beijing regulators are seeking more control over industries including tech, gaming, e-commerce and education.

‘It’s a real contrarian play’

“Regulations have been targeted on specific areas that sync with long-term policy objectives by the Chinese government,” she said. “We’re closer to the end of any significant series of regulations than we are towards the beginning. This is very much a buying opportunity. I think it’s a real contrarian play.”

In more of a mainstream take, Hooper is bullish on U.S. stocks, too. So far, she’s also not overly worried about the new Covid-19 omicron strain here either.

“This does seem to be very contagious, but very mild. And so, it suggests that we are unlikely to see lockdowns,” she said. “The metric to follow right now in the absence of lockdown… is mobility. And, mobility has hardly been affected in terms of individuals getting out, participating in shopping [and] restaurants.”

Hooper believes Federal Reserve policies won’t derail the risk-taking environment either.

“The U.S. is likely to see a deceleration in its economy as the Fed starts to tighten, and of course, as we see fiscal stimulus removed,” noted Hooper. “We’ll still likely remain above trend in terms of growth.”

And, that’s where Hooper’s outlook takes another contrarian turn. One of her major calls includes U.S. tech stocks outperforming cyclicals. According to Hooper, there’s a widely held assumption on Wall Street that tech is a safer asset class.

“We could certainly see cyclicals outperform in the shorter term given what I expect to be a strong December,” Hooper said. “But I do believe for the vast majority of 2022, we’re going to see secular growth [and] defensives, especially technology, perform better.”

The tech-heavy Nasdaq is up 20% so far this year, and 125% since the pandemic low.


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