“How are the roads?” This is an important question every winter in the Midwest. Before we venture out on the snowy roads, we want to know what earlier drivers have said. We watch the local news, look on social media, and sometimes even text family members to find out if it’s safe to drive on the roads or if we need to stay home. This article is my opinion of the financial road conditions for 2022.
I don’t see the 2022 market repeating the 2021 market that looked great the first quarter coming out of the pandemic shutdowns of 2020.
Economy-wise, the US is close to the middle of the current economic cycle. LPL Financial researchers forecast 4.0–4.5% growth in Gross Domestic Product in 2022. The Federal Reserve played a huge role in the economic recovery in 2021, but markets need to see a smooth backing out of that role in 2022.
On the inflation front, 2021 was hard on consumers. Last year prices increased on the things we buy and there seem to be shortages on nearly everything. Inflation should slow down and even decrease slightly in 2022 if we can improve the supply chain problem.
Stocks/equities should continue to benefit from consumers’ high demand for goods. Analysts expect continued strong earnings growth in 2022 to help U.S. stocks have another good year. The economic momentum might slow some, but it should remain strong.
Bonds may not have the opportunities in 2022 as stocks. LPL Financial researchers forecast the year-end 10-year Treasury yield to be 1.75–2.00%. This rising rate environment and the continued bull equity market could leave bond returns flat or low single digits in 2022.
All in all, I think 2022 will see inflation start to slowly decrease instead of increase, and economic momentum will slow but remain strong. Most importantly, we will see the Federal Reserve start to pull back which I believe it needs to do.
So how are the market roads? They aren’t perfect but pretty good. You don’t need to stay home in fear. Just drive cautiously and give yourself plenty of room to slow down.
Have a blessed week!
2760 East Sunshine St. Springfield, MO 65804
The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee their strategies promoted will be successful. Investing involves risk including possible loss of principle.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
Securities and advisory services offered through LPL Financial, a registered investment advisor, Member FINRA/SIPC.