Markets in a “Swinging Mood” for the Start of 2022

The robust returns of 2021 have been followed by early volatility in 2022. Here is a consensus of what many of the analysts are saying:

Three major issues have come into play.

1. Interest Rates: Both the Bank of Canada and U.S. Federal Reserve are expected to implement 3 to 4 interest rate hikes in both 2022 and 2023 with the first increases commencing in March or April of 2022. These rate hikes are expected to cool inflation, concerns about the housing market and the fact that the strong labor markets do not warrant low-interest rates.
2. Inflation: The consensus is the 4.8% rate recorded in December is near a peak and will drop to between 2 to 4% by the end of 2022. This predicted drop is a result of decreasing consumer demand and the anticipated rise in interest rates.
3. Economic Growth: The IMF’s latest World Economic Outlook calls for the global growth to drop from 5.9% in 2021 to 4.4% in 2022 with the US and China economies expected to grow 4.0% and 4.8% respectively. While down from the robust growth in 2021, these are still solid growth rates.

Russia/Ukraine Invasion: While certainly the news item of the current cycle, it does not appear to be a significant issue impacting the economic forecasts of many analysts.

As I have mentioned in past Newsletters, Markets prefer certainty (good or bad) over uncertainty and as the issues itemized above unfold and work themselves out, stability should return. I believe that over the next few years, your Managed Portfolios will provide the research resources, stability and expertise to preserve and grow your investments.

Please feel free to contact me to discuss any questions pertaining to your investments, policies or other financial matters.

John Shelling CGA, CPA, CFP®