If there’s one thing with more variants than Covid recently, it’s opinions surrounding the financial market outlook for 2022. From predictions of recession to another year of euphoric returns, internet click bait provides an endless supply of opinions to match any proclivity – all packaged as sound financial analysis. One of the sources I regularly look to in formulating an outlook for the year ahead is Bob Doll of Crossmark Global Investments. Doll puts out 9 market predictions (plus one political prediction) annually and has track record of rational analysis without fear mongering or self-serving sensationalism. Sharing his predictions here may provide some clarity for the 2022 financial year.

1.  U.S. real growth and inflation remain above-trend but decline from 2021 levels.

2. Inflation falls, but core inflation remains stuck at around 3%.

3. For the first time since 1958/1959, 10-year Treasuries provide a second consecutive year of negative returns.

4. Stocks experience their first 10% correction since the pandemic and fail to make the gains widely expected.

5. Cyclical, value and small stocks outperform defensive, growth, and large stocks.

6. Financials and energy stocks outperform utilities and communication services.

7. International stocks outperform U.S. stocks for only the second year in the last decade.

8. Values-based investing continues to gain share.

9. After a 60+ year low in 2021, federal interest expense as a percentage of revenue begins a long-term move higher.

10. Republicans gain at least 20-25 House seats and barely win the Senate.

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To summarize the high points of these predictions in my own words:

• Several investment areas present opportunities in 2022 such as value, international, financial and small company funds.
• Rising interest rates make short-term fixed income more desirable than long-term fixed income for the immediate future (bond prices drop as interest rates rise).
• Inflation remains high compared to previous years but drops as the year progresses.

The above factors make it appropriate to tap the brakes on expectations of hyper growth like we’ve seen the past couple of years. Continued Covid concerns and new variants have already given new meaning to the term “long-haul Covid” for all of us and will most likely contribute to a year of increased volatility and a possible 10% correction. Despite this, Doll expects to see moderate, single digit growth in 2022 which strikes a measured balance between the recessionary gloom and unfounded optimism that undoubtedly garner more internet clicks.

Jonathan is the founder of Evenkiehl, LLC, an independent, fee-only Registered Investment Advisor located in Lancaster, PA serving clients locally and across the US.