2022 Market Outlook
February 9, 2022 - In case you missed the most recent edition of Insights, our quarterly newsletter, here’s our current market outlook for 2022.
ECONOMIC OUTLOOK: A Moderating Growth Rate but Healthy Global Economy
- Consensus forecasts suggest global GDP growth in 2022 to be in the range of 4.0% to 5.0%, moderating from the 5.8% growth rate experienced in 2021.
- The critical driver for lower expected U.S. growth will be the withdrawal of fiscal stimulus that fueled U.S. GDP growth to 5.7% in 2021.
- We expect the U.S. economy to gradually resume a trend growth rate of 2.0% to 2.5% in the latter part of 2022.
MONETARY POLICY & INTEREST RATES: Expect U.S. Short-Term Rates to Increase Meaningfully in 2022
- We expect short term interest rates in the U.S. to start normalizing as the U.S. Federal Reserve (Fed) shifts its focus to reigning in the highest inflation levels seen in almost 40 years.
- We expect inflation rates to remain elevated in 2022 but to gradually weaken throughout the year as consumption moves from goods back to services and as supply chain disruptions subside.
- We do not expect long-term interest rates to move significantly higher from current levels.
CAPITAL MARKET OUTLOOK: We are generally constructive on capital market performance
- We see the potential for continued healthy global corporate earnings growth to drive equity markets higher in 2022.
- We also expect higher volatility, as the process of pricing in higher interest rates leads to market uncertainty.
- We believe credit markets will remain healthy on continued strong corporate earnings that can withstand current debt levels.
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