Many clients have asked for a recap from our February Virtual Coffee
Chat. If you were unable to attend, we missed you! This month we spoke
with Mark Eibel Director of Client Investment Strategies for Russell
Investments, who is also frequent guest on CNBC TV and Bloomberg TV.
Mark shared that many analysts believe global growth will be slower in
2022 than 2021, but still overall above the trend. Amid this backdrop, he
still thinks stocks should outperform bonds. While inflation has yet to peak,
Mark believes it will likely decline over the year and expects any tightening
by central banks in 2022 will be modest.
Key market themes
2021 was a year of rebound and recovery, and Mark expects that 2022,
by contrast, will be a year of moderation—particularly when it comes to
growth, inflation, and investment returns. He says developed economies
have capacity, households are sitting on accumulated savings from the
pandemic lockdown and central banks are planning to remove
accommodation only gradually. Overall, the global economy appears
poised for a second year of above-trend growth, but at a slower pace than
in 2021.
We discussed that the three main uncertainties for 2022 appear to be:
*The durability of the spike in inflation
*The extent and duration of the property-market-driven slowdown in
China
*Possible further COVID-19 lockdowns as infection rates increase
again or new variants emerge
Analysts expect the spike in inflation will be mostly transitory, although it
could reach uncomfortably high levels in early 2022 before declining as
supply-side issues are resolved.
In the U.S., Mark shared that moderating demand, coupled with a
rebalancing in demand (from goods to services) and a healing supply-side
of the economy, should allow inflation rates to throttle down aggressively in
the second half of 2022. The thought would be going from hyperinflation to
a more normal inflation environment.
Across the pond in Europe, they are expected to head into 2022 with
healthy growth momentum, with business surveys showing broad-based
gains across countries and sectors, and fiscal policy set to provide
support to growth.
China’s property-market downturn (car and homes sales dropping again
as the housing market crisis drags on), triggered by the collapse of
developers such as Evergrande, has been a large drag on economic
growth. Analysts assume that there will be some stimulus in the first half of
2022, which should see China’s growth trajectory improve toward the end
of the year. In Japan, inflation has remained very subdued, due to softer
demand and less challenge with their supply chains.
I hope you find this recap helpful. As always, please let me know if you
have any questions…
-Jennifer
Guest speaker and/or Russell Investments are not affiliated with or
endorsed by LPL Financial and/or Platinum Wealth Management.