Now that 2022 has arrived, there are several economic themes worth monitoring. Specifically, our team plans to watch inflation, employment and interest rates as influential economic themes in the new year. Please find articles on each of these themes below outlining their potential economic impact in 2022.
Transitory-ish
As inflation measure climbed over 2021 to levels not seen in decades, there was a rush by some to project the heightened levels would continue into foreseeable future. Even Federal Reserve Chair Jerome Powell and Treasury Secretary Janet Yellen recently stated the term “transitory” should be retired when discussing the outlook for inflation in the United States.
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A Tighter Job Market in 2022
Employment will be a major theme influencing investment markets in 2022. Tighter job markets have the potential to influence companies’ earnings negatively. The impact could range from increased product costs associated with lack of labor supply to increased labor costs from companies paying higher wages to attract employees.
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Don’t Fear a Repeat of the 1970s
Forecasts for a repeat of 1970s-style surging bond yields and inflation are becoming quite common. And many more suggest a similar path although with a more muted magnitude. It is our expectation that by the end of 2022, you will hear less of these forecasts. The simple reason is that the bond market leads inflation, and it has been made clear based on available information we should be more concerned with a deflationary growth scare in 2022.
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Source: BTC Capital Management, Bloomberg LP, Ibbotson Associates, FactSet, Refinitiv.
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