Each month, senior leaders of Hancock Whitney's Asset Management team discuss the latest news and events that impact markets and the economy.
Key takeaways this month:
- January proved to be difficult and volatile for both equity and fixed income markets. Federal Reserve Chairman Powell’s hawkish post-meeting comments, Russia / Ukraine tensions, and above average stock valuations all were possible contributing factors.
- The outlook for equity returns remains positive but modest. Fed tightening and geopolitical risks will likely continue to lead to volatility, but continued solid earnings reports and favorable corporate profitability should propel stocks forward.
- Fixed Income yields will likely continue to edge up as the Fed’s balance sheet begins to shrink and the Fed begins hiking rates very likely starting in March and throughout the remainder of the year. 4-5 rate hikes are likely.
- U.S. 4Q Real GDP outpaced expectations with a preliminary robust 6.9% reading. 1Q outlook isn’t as healthy as many headwinds, including Omicron, could dampen growth to closer to 3%. Longer term expectations with a less accommodative Fed easing back to the 2-3% range.
- While supply chain issues have eased, inflationary pressures are still present. As the economy moderates in the upcoming months, we anticipate inflation to crest and eventually slow possibly by summer.
- The buildup of Russian troops near the border of Ukraine remains a concern as it provides Russia the capability to invade all of Ukraine and capture significant territory and cities. An invasion would likely drive a breakdown in Russia’s relationship with the West, potentially leaving large parts of Europe with insufficient energy this winter while leaving Russia economically crippled. We don’t believe this is a likely outcome, but as of now, the risk remains.
Did you miss our 2021 Year in Review and 2022 Economic Outlook?
Read our review of the key market, policy, and economic highlights of 2021, and our thoughts about likely investment themes for 2022, including the economy, stocks, Federal Reserve and interest rates, and government Policy.
See and hear the February 2022 presentation by clicking on the play arrow below:
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