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Getting a market outlook for 2022

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Ryan T. Fulmer

Ryan T. Fulmer

As we review earnings, sales and economic growth for 2022, investors should focus on several interrelated, but key, items:

1. Will inflationary pressures end up being transitory as Federal Reserve President Jerome Powell has been predicting? Economists expect to see core inflationary rates start to materially decline by the summer of 2022. This week, Powell indicated they may accelerate their tapering plans. Higher interest rates, which provide low-risk returns, offer competition for all other asset classes. In the context of the stock market, higher interest rates weigh on valuations and will likely dampen future stock returns.

2. Global economic growth is expected to be robust in the first half of 2022, supporting sales and profit growth for stock prices. At the moment, this assumption by the stock market doesn’t look as risky as inflation expectations, but any new or prolonged concerns relating to Coronavirus, sovereign debt, and tax reform could negatively impact these expectations. Since the start of the pandemic, global stock markets have generally risen together. In 2022, markets will likely start to differentiate themselves, with domestic and other developed markets faring better than emerging markets.

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