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BlackRock Bottom Line: What does 2022 hold for markets?

Wei Li: The three themes for our 2022 global outlook, thriving in a new market regime, are living with inflation, cutting through confusion and navigating net zero.

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Wei Li: Our first theme is living with inflation. We have flagged inflation and we are now living with inflation. We expect inflation to settle at levels higher than pre-Covid, even as supply bottlenecks ease. We also expect the Fed to kick off rate hikes but remain more tolerant of inflation than previously.

The second theme is cutting through confusion. We want to acknowledge the risks around our base case. We have never experienced an economic restart like this and confusion is only natural among policy makers and markets adapting to this new reality.

Our third theme is navigating net zero. Climate change is real and we believe that the best possible outcome for growth and inflation is via a smooth transition.

The bottom line is we see the combination of a still robust economic restart, even if delayed. And the still historically low negative real yields, even if higher, supporting another up year for equities and down year fixed income. But we have dialed back our risk-taking given the unusually wide range of outcomes in 2022.

Disclosures

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Thriving in a new market regime

What does higher inflation mean for markets in the new year? Find out on this episode of the Blackrock Bottom Line.

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