Raymond James' Ten Themes for 2022
By: Cameron Diehl, CFP®
Friends – As we move into 2022, I wanted to continue an annual tradition and share some highlights from Raymond James’ “Ten Themes for 2022” from our excellent Chief Investment Officer, Larry Adam and his team. Previous lists have proven quite useful for framing the year, with the team’s 2021 list scoring ~85% accuracy.
This year, given markets’ incredibly strong performance in recent years, the (still) ongoing pandemic, concerns over inflation, rising interest rates and myriad other uncertainties, informed, measured perspectives are more valuable than ever. With that in mind, the Winter Olympics-themed points below provide a great framework to guide conversations in 2022.
- The U.S. Economy Is Ready To Take Off – The U.S. economy should post its second consecutive year of above-trend growth as the gradual transition to the endemic state occurs. Healthy consumer cash balances and the steady rebuilding of inventories should also bolster growth.
- The Fed Must Adeptly Navigate The Fast-Moving Economy – We expect slowing economic growth, dissipating inflationary pressures, talk of the yield curve inverting, and the more dovish voter composition to allow for a still patient, relatively accommodative Fed.
- Yields Will Swerve Between The Gates – As the Fed unwinds accommodative policies, yields should move slightly higher, making for a challenging environment for fixed income returns. Bonds should be used to protect against equity risk, and periodic bouts of volatility could create opportunities in the corporate credit markets.
- The Democratic ‘Blue Wave’ Is Skating On Thin Ice – History suggests the incumbent party tends to lose seats in the House of Representatives during the midterm elections, making gridlock the anticipated outcome. As such, any major policy shifts are unlikely.
- Equities Transition From Power & Speed To Targeted Precision – Earnings should move higher in the midst of robust economic growth and still healthy margins. The continuation of shareholder-friendly actions and a still low interest rate environment should also help the S&P 500 reach the 5,000 level for the first time.
- Sector Exposure Will Steer Small Cap In The Right Direction – Relative to the S&P 500, valuations are trading at the lowest level on record. Combined with strong earnings growth expectations, small-cap equities should present an opportunity for investors.
- There Are No ‘Bindings’ On Technological Re-Invention & Adoption – The seemingly expensive tech valuations are justified by the continued strength in earnings and the fact that business plans for future tech spending are near record highs.
- Focusing On U.S. Equities’ Consistent Stride – In the long run, profitability ratios favor domestic equities. However, attractive valuations, involvement in high-growth tech-oriented industries, and the scope for additional fiscal stimulus measures could make the Asian emerging markets an area of opportunity.
- Oil Price Dynamics Will Find Their Balance – As supply and demand continue to normalize, especially as the world transitions to the endemic state, oil prices above the $80 per barrel threshold will be short-lived. With oil prices no longer below breakeven levels, further investment in the renewable energy space is likely to occur.
- Look Below the Surface For Opportunities – As the bull market ages and as headlines related to the Fed’s tightening cycle, COVID, midterm elections, and geopolitics circulate, the equity market is likely to experience more volatility relative to last year.
You can view a replay of a recent webinar where Larry presented these themes. If you’d like to discuss how these themes relate to your personal planning, let’s connect. I’m happy to help.
