What are now familiar headwinds – higher inflation, tightening global monetary policy, rising interest rates, weak economic growth, and geopolitical tensions — continued to pressure financial markets in the third quarter, with many economists debating whether we are currently in, or soon will be in, a recession.

September 9, 2022 – With interest rates rising from significantly depressed levels, there is some ability to earn more than the next-to-nothing that’s been available in cash equivalents for quite some time.

High inflation, rising interest rates, and geopolitical risks continued to weigh on the outlook for global economic growth. Central bankers and market participants are trying to assess how much financial conditions will have to be tightened to reign in inflation and whether that will lead to a mild slowdown in growth that we’ve already begun to see or push us into a recession. These times of economic resetting are a natural, though unpleasant, part of the economic cycle. By reigning in excesses, we set ourselves up for a more sustainable future growth path. A very tight labor market with two jobs available for every unemployed worker, ample consumer savings, and capital expenditures by businesses are helping the economy from losing too much steam too fast. 

May 13, 2022 – We expect that recent market performance and news headlines have generated feelings of uncertainty and anxiety; that’s not surprising. As we look at the economic data, there is certainly some cause for concern.

Economic growth slowed in the first quarter, with real GDP estimates around 2%, coming off a very impressive 7% growth rate in Q4 2021 and a full year of growth in 2021 like we have not seen in decades. A very tight labor market pushed unemployment lower and wages higher. As the impact of COVID eased in the U.S., more people, especially women, began returning to the workforce. This is a positive sign for economic productivity going forward.

March 2, 2022 – Our reaction to the Russian invasion of Ukraine is one of compassion for all those directly impacted, and our thoughts are with you as these unsettling events unfold in front of us.

2021 was a positive year by many economic measures and this showed up in strong GDP growth. Despite the persistence of the pandemic and higher inflation in 2021, the economy showed strength in spending habits and healthy consumer balance sheets, housing prices, job growth, wage increases, manufacturing and services activity, government investment, and corporate profits. The unemployment rate dropped to 3.9% by year end, just half a percent higher than it was pre-pandemic when the economy was humming along.

Global economic growth has been strong with economists forecasting ~6% growth in 2021. In the U.S., GDP growth is expected to be around 5% for the third quarter (it was 6.3% in Q1 and 6.7% in Q2). While the rate of growth is expected to slow this quarter relative to earlier in the year, we remain in a much stronger growth environment than we’ve experienced in the past several years; about double to put it in perspective. Along with this growth, long-term interest rates rose, likely helped by the expected Fed asset purchase tapering later this year and continued inflation concerns.

It was a strong quarter for global growth and global markets. Advances were driven by expanding vaccinations, relaxation of shutdown measures and the flood of economic activity from reopening coupled with pent-up demand and continued accommodative fiscal and monetary policy. GDP growth is expanding rapidly, both domestically and overseas. Global corporate earnings and forward estimates generally remained upbeat amid improving economic data. In the U.S., the unemployment rate remained a concern, edging higher and remaining well above its pre-pandemic level. Conditions should therefore remain accommodative.

What a difference a year makes! While it may seem much longer since we have been under global pandemic-induced “house arrest”, the end of the first quarter of 2020 had us all feeling a bit worse, at least from a capital markets perspective, than the end of the first quarter of 2021. A year ago, we were amid one of the swiftest market declines on record. Today, we sit near all-time highs. While that comes with its own risks, it certainly feels much better.

The year 2020 proved to be one of the most tumultuous in modern history, marked by a number of developments that were historically unprecedented and unpredictable. It also demonstrated the resilience of people, democratic institutions, and global financial markets. Despite the extraordinary events of the first few weeks of 2021, and the likelihood we will have a very difficult winter, we are optimistic about 2021. Multiple vaccines have been approved and while off to a sluggish start, there is reason to believe distribution will improve rapidly and the pandemic will finally draw to end late this year. That is not to say there are not uncertainties around the pace of the recovery, ongoing political uncertainty, and millions of people without employment opportunities. After two very strong years, we caution clients to expect more muted returns in the near future.