Quarterly market outlook - 1st Quarter, 2022

Our investment strategists provide the Edward Jones perspective on the latest economic activity and what it may mean for investors.

The Quarterly Market Outlook provides investors with our perspective on recent activity in the capital markets. The Edward Jones Investment Policy Committee offers its viewpoints on the U.S. economy, equities, the bond market, international markets and asset classes, as well as a special topic of interest to investors each quarter.

These aren’t short-term predictions. Rather, this is Edward Jones’ perspective on market and economic topics designed to help you make decisions affecting your long-term financial strategy. As you read through each topic, you'll find specific actions you can discuss with your financial advisor.

A look back at 2021

2021 saw rapid economic growth, above-average equity returns, rising inflation and speculation. The economy reclaimed its pre-pandemic peak GDP levels in November after growing for 6 straight months.

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Economic outlook

The economic expansion should continue in 2022, aided by declining unemployment and pent-up demand for services. Despite some uncertainty early in the year, the economy should catch a second wind in the latter part of 2022, spurred by healthy consumer financial positions and progress in clearing some supply bottlenecks.

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Equity outlook

U.S. and Canadian equities ended the year on a strong note, with the S&P 500 returning 27% for the year, and the Canadian TSX up an impressive 23%. Markets climbed several walls of worry, including a rise in virus cases driven by the omicron variant, rising expectations for rate hikes in 2022 from both the Bank of Canada and Federal Reserve, and uncertainty around the path of inflation.

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Fixed-income outlook

We see all eyes remaining on the U.S. Federal Reserve in Q1: By the end of March, we expect the Fed will have concluded its balance sheet tapering program – bringing bond purchases to zero from a rate of $125 billion per month – and position itself to then raise rates.

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International outlook

Successive COVID-19 waves continue to interrupt the global recovery, but the growth outlook remains positive for 2022, supported by pent-up consumer demand and elevated savings.

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Outlook for inflation and Fed policy

Inflation remains the biggest risk to the positive market narrative. While we think it will remain stickier than we’ve experienced over the past 20 years, we believe some relief is on the way.

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Strategic asset allocation guidance

Our Strategic Asset Allocation represents our view of balanced diversification for the fixed income and equity portions of a well-diversified portfolio based on our outlook for the economy and markets over the next 30 years.

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Quarterly market outlook - Full report from Edward Jones

Download the entire quarterly market outlook report here.

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