Inflation and Fed Policy

Key Determinants for the Economy in 2022: Inflation and Fed Policy

“Investors should be prepared for the ground to shift repeatedly in 2022,” says Raymond James Chief Economist, Dr. Scott Brown.

As suspected, I am having a lot of conversations with clients about inflation these days. The risk for continued inflation seems elevated. Price increases have continued to broaden. Hopefully we will see some rollback of prices in consumer durable goods, but inflation for services have been picking up, and of course there is the oil and gas prices up significantly since this time last year.

The U.S. economy experienced good and bad surprises in 2021. But the outlook for 2022 is likely to be even more volatile with inflation and Fed policy factors.

Here are some key takeaways offered by Dr. Scott Brown:

• The outlook for the coming year is likely to be more volatile than 2021 with inflation and Federal Reserve (Fed) policy as the major factors.
• Key components of GDP – consumer spending and business fixed investment – rose at an annual rate of 11.7% and 11.1%, respectively, in the first half.
• Near-term inflation expectations have risen, but longer-term inflation expectations have remained consistent with the Fed’s goal.
• GDP growth should be slower, but still beyond a long-term sustainable pace. Our expectation is GDP growth will be approximately 3.5% in 2022.

So what does all this mean for your portfolio, retirement planning and financial planning?

As your wealth manager, I am continually listening, researching, and analyzing the effects of inflation and Fed policy on the markets and your investments.

To be sure, no two clients are the same. Every client is unique with their goals, risk tolerance, and time horizon. Call us to schedule a meeting – either in person or over the phone - if you have specific concerns related to your portfolio. You can also call to get a full recording of Dr. Scott Brown’s 2022 outlook.