On Air with Altair: 1Q 2022 Market Review Video
Want to hear Altair’s analysis of the markets, but do not have the time to read all of Altair Insight? Watch our video summary of the report or listen to the podcast episode and get caught up on our market review in 3 minutes.
FED RATE HIKES
- The Federal Reserve raised short-term interest rates by a half-percentage point in May – the first time in 22 years it has hiked rates that much.
- It also is moving to reduce its nearly nine-trillion-dollar balance sheet.
- This aggressive tightening after two years of heavy monetary and fiscal stimulus is painful.
- But the economy has shown resiliency, held up by strong corporate and consumer health and a robust job market.
- Certainly the economy will slow down. Given its strength, however, we believe a recession is unlikely this year.
- The inflation rate has risen to a four-decade high, forcing the Fed to act and putting pressure on consumers, companies and markets.
- Russia’s invasion of Ukraine and the lingering effects of the pandemic have worsened the outlook for when price increases will moderate.
- We expect inflation to remain uncomfortably high through the rest of the year.
- The Fed’s efforts to fight inflation and an eventual loosening of supply-chain bottlenecks should result in a much-improved situation by year-end. But inflation has no chance of returning anywhere near the Fed’s 2% sweet spot before next year.
STOCKS AND BONDS STRUGGLE
- A rare slump in both stocks and bonds has made for a very disappointing 2022 so far.
- While stocks are likely to experience more bouts with above-normal volatility this year, we expect them to resume their upward path over time.
- The S&P 500 has risen in 10 of 13 rising-rate cycles dating back to 1960.
- Bonds have had a historically poor year, in part because the market has quickly priced in most of the anticipated Fed rate hikes.
- We are committed to maintaining portfolio diversification and even further diversifying client portfolios in this changing environment, like adding investments beyond traditional stocks and bonds.
- We are confident that the risk of a recession in 2022 is low but the fear of a recession will linger for some time. We believe a solid and resilient economy will carry us through this challenging period. The economy is stronger than markets are suggesting.
You can find our full commentary here. Thank you for watching.
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