Zacks Investment Management

2021 was a solid year for stocks and the broad economy, but challenges to economic growth – e.g., inflation, supply chain woes, labor shortages – seemed to overwhelm the headlines. Eyeing these challenges in the new year will be key, and we have three specific areas investors should watch in 2022.

• Will the Federal Reserve Raise Interest Rates?

A big piece of the economic recovery story in 2021 was high and persistent inflation. Specifically, the highest rate of inflation the U.S. economy has experienced in 30+ years.

For the better part of the year, the Federal Reserve clung to the narrative that inflation was “transitory,” signaling their view that pressures would eventually ease. Instead, the pressures remained. By late November, the Fed was engaging in a form of damage control, removing the word “transitory” from their inflation forecast and indicating a more rapid unwinding of QE. In the fall, the QE program was slated to end in June 2022. By the end of November, the date had shifted to March 2022.

In our view, the coming year should see prices stabilize, as consumers increasingly shift purchases to services and as supply chain kinks get ironed out. However, it is possible – perhaps even likely – that price pressures do not abate until the second half of next year, which may leave the Fed no choice but to move up their forecast for interest rate increases. To date, policymakers have been reluctant to raise rates during an ongoing pandemic – but inflation pressures and a strong labor market may force their hand.¹

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Is Trading Your Retirement Worth the Risk?

If you’re thinking about retirement planning in the new year, we recommend thinking about how you would like to manage it. It’s different from managing your investments, and even if you’re a smart investor, trying to self-direct your retirement investments poses an extremely high risk!

So, instead of letting your emotions take control, try to focus on the long-term outlook and the hard data. If you have $500,000 or more to invest, get our free guide, “Why Trading Your Own Retirement Can Be Hazardous to Your Financial Health”—it offers some compelling reasons—backed by facts and research—why trading your retirement assets can be hazardous to your financial health.

This guide explores some of the key differences between trading and investing for retirement:

• The conflicting goals of investment trading and long-term retirement strategy
• Common investor behaviors that can have long-term negative impact
• The near-impossibility of picking consistent winners over time
• Plus, more of the hazards of actively trading your retirement assets, and our views on how to avoid them

Download Your Copy of “Why Trading Your Own Retirement Can Be Hazardous to Your Financial Health.”²

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• Can Corporate Earnings Continue Outperforming Expectations?

While coverage of inflation and supply chains has largely remained negative, U.S. corporations have continued to brush off the challenges and post record profits. Impressively, corporations have posted record earnings in the last two quarters (Q2 and Q3 2021) even without the help of the leisure, hospitality, and travel industries. Companies in this space are still earning significantly less than they did in the pre-Covid period, and in fact, many of these companies aren’t expected to get back to pre-Covid profitability levels for another year at least. The key question in 2022 is whether spending will shift to services and boost other areas of the economy, and/or if inflationary pressures will finally start to crimp margins for the to-date well-performing parts of the earnings picture. The trend emerging from current consensus estimates (seen in the chart below) appears to show inflationary trends as indeed temporary with little effect on earnings in 2022. Time will tell.³

• Will the Jobs Market Strengthen and Be a Force for Strong Demand?

Labor shortages in 2021 were a major headline. Something to watch in 2022 will be whether workers start to accept some of the 10 million unfilled job openings. As we write, some four million workers have yet to return to a job, for a variety of reasons – early retirement, lack of childcare, persistent fear of Covid-19. Will the tides shift a bit in the new year, in what could be one of the strongest jobs markets in U.S. history? Again, this will be a factor for investors to watch in the new year. If the jobs market strengthens further, it would arguably drive additional economic demand in 2022, particularly since wages have been rising at a rate close to inflation. Personal consumption has risen by 12% since 2020, and the ratio of disposable income to household net worth are close to a record high. Will consumer finances improve even further in the new year, driving another year of strong consumer demand? We think so.⁴

In addition to these factors that can change the market at any given time, you might be wondering how you can better protect your investments in the new year. Especially for those preparing to retire – trying to manage your retirement assets could be very risky. Financial security is key!

Our free guide, “Why Trading Your Own Retirement Can Be Hazardous to Your Financial Health”⁵ offers some compelling reasons—backed by facts and research—why trading your retirement assets can be hazardous to your financial health.

This guide explores some of the key differences between trading and investing for retirement:

• The conflicting goals of investment trading and long-term retirement strategy
• Common investor behaviors that can have a long-term negative impact
• The near-impossibility of picking consistent winners over time
• Plus, more of the hazards of actively trading your retirement assets, and our views on how to avoid them.

If you have $500,000 or more to invest, get our free guide today!

Disclosure