Analysts at Jefferies have named their top U.S., European and Japanese stock picks for 2022. "We envisage a macro environment in which growth has peaked, while inflation remains sticky, forcing central banks to withdraw liquidity. At the same time, there is fiscal stimulus in the U.S. and Japan which continues to cushion growth. We expect U.S. bond yields to rise in 2022, the dollar to strengthen and for China's policy crackdown to peak," the analysts, led by Desh Peramunetilleke, said in a note on Dec. 6. The bank noted that earnings for stocks on the MSCI AC World index are expected to "decelerate significantly" to 6.1% in 2022 from 49.3% in 2021, with Japan expected to register the best growth, followed by the U.S. and Europe. "While earnings growth would still be reasonably high, stretched valuations amid relatively tighter monetary conditions would limit the upside. Overall, [developed markets] remain a favorite, led by the U.S. and Japan," Peramunetilleke added. U.S. value and growth stocks The bank expects earnings-led momentum to continue in the United States and has forecast earnings growth of more than 10% for U.S. equities in 2022. The bank favors value stocks without structural headwinds, as well as reasonably priced growth and quality stocks. Within the value space, the bank's picks include aluminum company Alcoa , pharmaceutical giant Pfizer and financial services firms Discover Financial , Goldman Sachs and JPMorgan . The bank's list of U.S. growth stocks with earnings momentum include Charles Schwab , farm equipment manufacturer Deere & Co , insurance firm Anthem , Chubb , Ford , and video game maker Electronic Arts . Its list of quality stocks at reasonable prices include the likes of Apple , Alphabet , Walmart , Cisco and Texas Instruments . Europe's reopening and inflation plays The bank noted that Europe's gradual reopening and earnings upgrade momentum will continue into 2022 despite the re-emergence of Covid-19 waves, driving the next leg of returns. In addition, Europe has been a strong beneficiary of the inflationary environment and rising bond yields, the bank added. The bank's picks include shipping firm AP Moeller , steelmaker ArcelorMittal , Austrian energy firm OMV, Daimler , Norwegian oil and gas company Equinor , Volvo , Deutsche Post , AstraZeneca , Infineon , STMicroelectronics , Carrefour , equipment rental group Ashtead and tire manufacturer Michelin . The stocks that are expected to benefit from rising inflation include commodities trader Glencore , ING , Credit Agricole , UniCredit and Luxembourg-based steel producer Tenaris . Japan's 'attractive market' Jefferies said Japanese equities present an "attractive investment opportunity," having outperformed both the U.S. and Europe since September, and continue to be an "attractive market." "The reopening theme is in vogue, spurring earnings momentum. Over the past three months, Japan has witnessed the best upgrade profile globally. Also, the election uncertainty is now over. Along with reopening, the consumption theme is being boosted by robust fiscal stimulus. Buyback momentum is rising too," Peramunetilleke said. The bank's picks in Japan equities include Toyota , Sony , chip-making equipment supplier Tokyo Electron , auto parts maker Denso , Olympus , telecommunications operator KDDI , Mitsubishi Electric , Suzuki Motor and pharmaceutical company Otsuka . The bank's list of Covid opening beneficiaries include Central Japan Railway , Subaru , and Japan Airlines .
F. Carter Smith | Bloomberg | Getty Images
Analysts at Jefferies have named their top U.S., European and Japanese stock picks for 2022.