Outlook 2022: Passing the Baton

Our resurgent economy grew at over a 6% pace in the first half of the year and is on track for over 5% growth for the year when 2021 draws to a close. The current economic recovery, which started in May 2020, has benefited from widespread vaccine availability and additional fiscal stimulus. While the economy continues to move forward, we’re still feeling the aftershocks of the COVID-19 Delta variant, whether through elevated inflation, supply chain bottlenecks, or an imbalanced labor market. But 2021 also saw positives beyond economic growth, with schools opening their doors and extended family gathering around many Thanksgiving tables, activities that were far less common in 2020. At the same time, the S&P 500 Index continued to advance as corporate America faced this generational challenge with resiliency and saw earnings growth that surprised even the most optimistic pundits.

The recovery has been a testament to our ability to manipulate our world. Scientists developed several vaccines extraordinarily quickly. Central banks and policymakers found ways to insert themselves into the complex network of economic relationships to help bridge the worst of the economic crisis. But the same scale that multiplies our control of the world can also multiply potential mistakes and make robust, complex systems more fragile. We’ve had a hand up that has helped us through a period of unique economic challenges. In 2022, the economy may be ready for a handoff, back to a greater emphasis on the
individual choices of households and businesses. How smoothly that handoff is executed may determine the course of the recovery.

On a smaller scale, for many of us, those individual relationships that always sustain us have been that much more vital over the last two years. We managed to stay connected with friends and family. Found new ways to work together with our colleagues. And relied on our relationships with skilled professionals to navigate difficult decisions. Sound financial advice in particular has helped guide many through this period of uncertainty. LPL Research’s Outlook 2022: Passing the Baton is here to provide insight and analysis for the next set of challenges the economy and markets may face. But for any investor, making progress toward your financial goals will continue to take a steady hand and a good plan. Please reach out to your financial professional for guidance on how to stay on track as we progress through 2022.

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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.

Alternative investments may not be suitable for all investors and should be considered as an investment for the risk capital portion of the investor’s portfolio. The strategies employed in the management of alternative investments may accelerate the velocity of potential losses.

Event driven strategies, such as merger arbitrage, consist of buying shares of the target company in a proposed merger and fully or partially hedging the exposure to the acquirer by shorting the stock of the acquiring company or other means. This strategy involves significant risk as events may not occur as planned and disruptions to a planned merger may result in significant loss to a hedged position.

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.

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