Year-end brought a resurgence of COVID-19 panic, led by the onset of the omicron variant in the United States. Families and friends met in large gatherings during the holiday season, the weather got cooler — sending people indoors — and hospitals became overwhelmed with new coronavirus cases. It made for a messy and chaotic end of 2021.
However, there are reasons to be encouraged going into the New Year. Setting aside the ongoing threat of the pandemic and new variants that may lay on the horizon, the U.S. economy has been remarkably resilient through it all. And the coming year offers a lot of good reasons to remain positive.
Everyone’s situation is different. If you feel the need to take stock of your finances and safety nets, please contact us for an insurance review. For a general view of the economic outlook in 2022, the following are insights and predictions from a variety of financial organizations.
Chief Investment Officer Lisa Shalett of Morgan Stanley believes that the new infrastructure bill out of Washington D.C. will sustain fiscal spending and improve labor market participation as well as the development of new, clean energy-related technologies. As companies continue to adapt to the pandemic, there will be an increase in the digitization of services businesses and adaptive technologies. The savings trend that has characterized the past two years looks to shift toward more consumerism by millennials and Gen Z, especially in the housing market. In fact, today’s well-capitalized U.S. banks and household balance sheets are poised to increase lending capacity.1
The current economic expansion, which began after the dramatic decline of March 2020, is now 20 months strong. While that doesn’t hold a candle to the record 128-month long expansion following the Great Recession, this recent economic trend is marked by record low unemployment.2 In December, the unemployment rate fell 0.4 percentage points to 4.2%. Perhaps even more encouraging, labor market participation bumped up to 61.8% in November, which represents the highest level yet since the lockdown of March 2020.3
As for rising inflation, the general view is that higher prices are largely due to supply chain disruptions and transportation issues, not a breakdown in economic fundamentals. Even with the new spending bills passed by Congress, both Moody’s and Fitch ratings agencies do not expect them to add to inflationary pressures.4
The Federal Reserve, which is responsible for the nation’s monetary policy, is a bit more concerned. Regardless of the reasons for rising inflation, it announced after its December meeting that the agency would reduce net asset purchases beginning in January but would maintain the target range for the federal funds rate at 0 to 0.25%. Not for the first time, the Fed emphasized that, “the path of the economy continues to depend on the course of the virus.”5
As of early December 2021, J.P. Morgan investment bank was highly optimistic that 2022 would mark the end of the pandemic, followed by normal economic and market conditions. This outlook is based on its belief that new therapeutics for preventing and treating COVID-19 will be widely accessible — and presumably embraced — which will alleviate supply-chain bottlenecks. Moreover, the subsequent resumption of global competition will bring the rising price of goods back in check.6
Content prepared by Kara Stefan Communications.
1 Lisa Shalett. Morgan Stanley. Dec. 14, 2021. “How High Will Interest Rates Raise?” https://www.morganstanley.com/ideas/fed-rate-hike-pace-peak. Accessed Dec. 21, 2021.
2 Center for Budget and Policy Priorities. Dec. 20, 2021. “Chart Book: Tracking the Post-Great Recession Economy.” https://www.cbpp.org/research/economy/tracking-the-post-great-recession-economy. Accessed Dec. 21, 2021.
3 Tim Smart. U.S. News & World Report. Dec. 7, 2021. “Decoding December’s Job Gains: We May Be Nearing Full Employment.” https://www.usnews.com/news/economy/articles/2021-12-07/decoding-decembers-job-gains-we-may-be-nearing-full-employment. Accessed Dec. 21, 2021.
4 Chad Stone. Center on Budget and Policy Priorities. Dec. 8, 2021. “Inflation Concerns Should Not Impede Enactment of Build Back Better.” https://www.cbpp.org/sites/default/files/12-8-21tax.pdf. Accessed Dec. 21, 2021.
5 The Federal Reserve. Dec. 15, 2021. “Federal Reserve issues FOMC statement.” https://www.federalreserve.gov/newsevents/pressreleases/monetary20211215a.htm. Accessed Dec. 21, 2021.
6 Nicole Goodkind. Fortune. Dec. 9, 2021. “J.P. Morgan says 2022 will be a great year: COVID’s impact will diminish and the economy will fully recover.” https://fortune.com/2021/12/09/jpmorgan-2022-outlook-great-year-covid-diminish-economy-recover/. Accessed Dec. 21, 2021.
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The information contained in this material is believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions.
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