Inflation outlook 2022, Wall Street recommendations
- As 2022 approaches, Wall Street companies agree that inflation will decline from current levels.
- Some say higher inflation will persist, and others think it will fall back to historical norms.
- Insider has rounded up the inflation forecasts for 2022 from strategists at Wall Street’s top companies.
2021 has been a banner year for the global economy on several fronts.
The stock market has continually rallied around historic peaks. An unprecedented 2,388 companies raised $ 453.3 billion in IPOs this year, an increase of 64% and 67%, respectively, year-over-year, according to Ernst & Young. And the total market value of cryptocurrencies has grown from $ 800 billion at the start of the year to $ 2.3 trillion.
But perhaps the most scrutinized economic indicator this year was inflation, which skyrocketed to its highest level in almost 40 years. The Bureau of Labor Statistics reported that the Consumer Price Index (CPI) – a commonly used indicator of inflation in the United States – has increased 6.8% yoy in November, an unprecedented number since June 1982. The personal consumption expenditure price index (PCE), often presented as a more precise indicator than the CPI for measuring consumption behavior, peaked at 5.7% in November – also the largest year-on-year increase since 1982.
“Every month in 2021 we have seen the rate of inflation rise,” Charlie Bilello, CEO of Compound Capital Advisors, said in his December 27 bulletin.
It’s a trend that the average American household has also noticed, with growing consumer demand forcing retailers to pass higher manufacturing costs on to customers by raising prices. From Oreos and Sour Patch Kids to real estate, everything is quickly getting more expensive these days.
It is therefore not surprising that by 2022, inflation will still be a priority for retail and institutional investors, with 31% of respondents in a recent Bloomberg survey highlighting that inflation is one of the biggest tail risks for markets next year.
Where is Wall Street?
“While supply chain and inflation headwinds may persist in the first half of 2022, we expect both to subside after mid-year,” Wells Fargo Investment said. Institute in its Outlook 2022 report. “We expect inflation to moderate from current levels in 2022, but remain above recent historical norms.”
It’s an opinion other companies like Goldman Sachs and Morgan Stanley seem to unanimously share as the new year approaches. Most investment banks expect inflation to decline from its current staggering highs as supply chain bottlenecks ease, but they predict it will always stay. high from pre-pandemic levels.
Banks differ, however, on the lasting ramifications of the inflationary pressures of 2021 – while some predict that higher inflation will persist for years to come, others believe it will converge towards historical norms much faster.
Below is a summary of the inflation forecasts for 2022 from nine major Wall Street companies, along with investment comments and recommendations for navigating each bank’s stock market.