2022 Mid-Year Outlook: Navigating Turbulence
Market turbulence cannot be avoided, however it also need not deter us from making progress toward our financial goals.
is ready to be viewed and is designed to help you understand market conditions over the second half of the year, alert you to the challenges that may still lie ahead and help you find the smoothest path for making continued progress toward your destination.
We've included highlights from the Midyear Outlook below:
Economy
- We expect the U.S. economy to grow in 2022, along with minimal growth in 2023. Annual growth rates may mask some of the intra-year economic activity which could be quite volatile.
- Depending on how aggressive the Federal Open Market Committee tightens and how elevated inflation stays, real quarterly growth could be negative, especially in the beginning of 2023, as high food and energy costs weigh down real spending.
Inflation
- Inflation will likely be above the Fed’s stated target of 2% as the rates cool down for the remainder of the year. This cool down period will slow down and the inflation pressure will subside as consumer retail activity eases.
- A slowing housing market will also help with inflationary pressure as supply and demand changes. The housing market is a lagging indicator and will still take some time.
Stocks
- LPL has lowered their 2023 S&P 500 Index fair value target to 4,300 – 4,400 on resilient earnings.
- Volatility is likely to persist, however a history of rebounds from weak quarters and strong late-year seasonal patterns in mid-term election years may provide support. You can also refer to our Reasons for Optimism In The Second Half of 2022 communication as an additional reference.
Bonds
- Uncertainty will persist for the 10-year Treasury yield. LPL Research expects it to settle in the 2.75 – 3.25% range by the end of the year.
- As inflation slowly subsides, high quality bonds are likely to return to their traditional role of portfolio diversifiers.
Policy
- 2022 is a mid-term election year with the possibility of a "mixed government" being elected.
- Historically, the S&P 500 Index have responded positively during periods of a “mixed government.”
It is important to remember that markets rarely give clear skies and there are always threats to watch for on the horizon, however the right preparation, context and support can help you navigate anything that may lie ahead.
If you have questions or would like to discuss your own financial planning or investment strategy needs, we welcome you to Contact Us to set up time to discuss further.
Disclosures:
The opinions, statements and forecasts presented herein are general information only and are not intended to provide specific investment advice or recommendations for any individual. It does not take into account the specific investment objectives, tax and financial condition, or particular needs of any specific person. There is no assurance that the strategies or techniques discussed are suitable for all investors or will be successful. To determine which investment(s) may be appropriate for you, please consult your financial professional prior to investing.
Any forward-looking statements including the economic forecasts herein may not develop as predicted and are subject to change based on future market and other conditions. All performance referenced is historical and is no guarantee of future results.
References to markets, asset classes, and sectors are generally regarding the corresponding market index. Indexes are unmanaged statistical composites and cannot be invested into directly. Index performance is not indicative of the performance of any investment and does not reflect fees, expenses, or sales charges. All performance referenced is historical and is no guarantee of future results.
Any company names noted herein are for educational purposes only and not an indication of trading intent or a solicitation of their products or services. LPL Financial doesn’t provide research on individual equities.
All index data from FactSet.
All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.