"While pandemic disruptions remain, 2022 offers hope of greater normalcy"
In 2021 the markets bobbed up and down through a year that had a little bit of everything: politics, bubbles, meme stocks, inflation, runaway rallies and sudden drops.
Although we don't have a crystal ball, we do have a few clues as to what we might look forward to in the first months of 2022.
What Can We Expect 3 - 9 Months Ahead?
U.S. Economic Outlook:
The U.S. Economy is positioned for continued growth in 2022, but the pace of the recovery may slow as the easy gains are likely behind us.2
Equity Outlook:
Some economists believe that stocks have room to grow this quarter, but we should be prepared for volatility and potentially even a correction.3
Consumer Spending:
Consumer Spending appears positive as Americans keep shopping in 2022.4 The possible obstacle here is inflation as the cost of goods may continue to rise putting a squeeze on the average family.
Labor Market & Business Outlook Survey:
The business environment looks solid in many sectors as workers return and consumers spend. As mentioned above inflation is a concern, and in some industries, supply chain issues are still causing disruptions.6
Fiscal Policy:
Fiscal policy is expected to tighten in 2022 as pandemic supports are removed. The Fed has plans to increase interest rates three times in 2022 in addition to discontinuing their bond-buying strategy. It's possible though, that federal infrastructure spending may support medium-term growth.7
Politics:
With mid-term elections approaching in March, politics will dominate the news. Election years always mean uncertainly, and that could be another factor contributing to volatility. Historically, stock markets bounce back after the election uncertainty is over.8
While the past doesn't predict the future, it's a good reminder of why we don't let elections drive strategy. They're just one more factor in a very complex system. All of these items - and many more - are on our radar constantly as we make adjustments and look for opportunities.
2. https://www.cnn.com/2021/12/31/economy/economy-covid-inflation-2022/index.html
4. https://www.marketplace.org/2021/12/31/what-might-consumer-spending-look-like-in-2022/
5. https://www.cnn.com/2021/12/03/perspectives/jobs-labor-market-trends-2022/index.html
6. https://www.cnbc.com/2021/12/16/why-former-us-treasurer-is-optimistic-about-economy-in-2022.html
7. https://www.fitchratings.com/research/sovereigns/north-america-to-grow-strongly-in-2022-policy-will-tighten-14-12-2021
U.S. Economic Outlook, Equity Outlook, Consumer Spending, Labor Market, Business Outlook, and Fiscal Policy gauges: https://www.cnr.com/insights/speedometers.html (December 2021)
