Q2 Outlook: Facing the Double Threat of Inflation and Recession
Inflation coupled with recession. That’s the one-two punch dominating financial markets as the first half of 2022 comes to a close. Although COVID cases and concerns faded over the last few months, the Ukraine War fueled price increases for oil (and other petroleum products) to historic highs and served as the key contributor to the current inflationary environment.
In an attempt to address supply chain shortages and slow consumer demand, and tamp down inflation just enough to ward off a recession, the Fed took strong action to normalize interest rates. It raised the Federal Funds rate to a target of 1.50–1.75% last month and is expected to boost it by another 0.75% before July is over.
Against this backdrop, both stocks and bonds suffered. Negative declines were posted in every equity asset class, except energy. And bonds continued to provide little value as a buffer against the volatility of the stock market.
Looking ahead, questions about the economy remain. So, how can investors prepare for what appears to be continued unpredictability? In our latest Market Insights, we review the markets, analyze key investment themes, and offer insights that can help you move forward.
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