2022 investment outlook: Will the economic recovery continue?

A couple stands next to a motorcycle and looks out over the horizon

Supply-chain issues, rising inflation, and a prolonged pandemic have markets at a crossroads. Darrell Cronk shares what investors might see in 2022.

Darrell L. Cronk, CFA, President, Wells Fargo Investment Institute, Chief Investment Officer, Wealth and Investment Management
Darrell L. Cronk, CFA; President, Wells Fargo Investment Institute;
Chief Investment Officer, Wealth and Investment Management

The impact of the global pandemic has remained with us through the past year in small and large ways, leading to unprecedented events that I never expected to see during my career. One such instance: In October 2021, wait times for container ships entering the two largest ports in the U.S. (Los Angeles and Long Beach, California) went from a day or two to at least 10. A record 100 cargo vessels were waiting to enter and unload cargo. This wait made headlines as supply-chain distortions became a popular topic at the start of the holiday season.

The backup at our container ports represents only one of many extraordinary events on my and my colleagues’ minds as 2022 approaches. The S&P 500 Index has posted remarkable price gains for three years in a row in spite of the pandemic. Jobs are plentiful, companies are strongly profitable, businesses have reopened, and new ones are being launched. Stock prices remain at strong levels. Yet still there’s an air of uncertainty over what comes next.

Investors are at a crossroads. Questions abound about the impact of fiscal policy, which seems set to become more expansive following the passage of the long-awaited infrastructure bill, and monetary policy, which looks less accommodative in 2022. The primary one is whether inflationary pressures will ease or we will continue to see consumer prices accelerate. Add rising energy prices and new waves of COVID-19 infections to this mix, and it’s no surprise that investors feel a sense of uncertainty.

At times like these, it’s important to separate valuable information from unnecessary information.

When you reach a crossroads, you typically ask: “Which way should I go?” To answer this question, you need information that gives you a degree of comfort that you may be making a sound decision.

At Wells Fargo Investment Institute, we believe that the key to the choices you make lies in the direction of the recovery. We anticipate that the recovery will likely continue in 2022, albeit at a more moderate pace than in 2021. In our view, inflation should cool somewhat but remain above average as supply shortages ease during the year.

At times like these, it’s important to separate valuable information from unnecessary information. That’s why I recommend reading our 2022 Outlook report for additional details and insight from the team at Wells Fargo Investment Institute. The report offers a clear direction for what we believe is next for the recovery, what we favor in financial markets for the coming year, and actions investors might consider as we approach these crossroads.

Wells Fargo Investment Institute, Inc. is a registered investment adviser and wholly owned subsidiary of Wells Fargo Bank, N.A., a bank affiliate of Wells Fargo & Company.

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