AMG Sees Choppy Growth This Year as Pandemic, Inflation Persist

The U.S. economy should keep churning this year, and that momentum is likely to continue through 2024. But as in 2021, the path of growth probably will be choppy thanks in large part to COVID-19 variants. Although both economic growth and investment returns have upside potential, volatility should be anticipated as the nation works to tame the pandemic and the government slowly but surely ends monetary and fiscal stimulus programs. Inflation should remain elevated through late 2022, but inflation expectations should not spiral out of control.

That’s the most likely scenario, or Base Case (called “The Re-Anchoring”), contained in AMG’s new three-year Economic Outlook (2022-2024). The document contains seven distinct economic scenarios—ranging from optimistic to pessimistic—for clients to review when meeting with their AMG advisors to consider rebalancing their portfolios. The Outlook also includes expected-return projections for various asset classes in each scenario.

With uncertainty around the path of economic recovery still elevated, prudent investors now more than ever should be aware of potential alternative paths for the economy and financial markets.

Despite inflation concerns, the U.S. economy is relatively strong as 2022 begins. The recovery from the pandemic-induced recession continued at a rapid rate during 2021. The unemployment rate declined from 6.7% in December 2020 to 3.9% in December 2021; private payrolls expanded by more than 6 million during the same timeframe. Yet, the economy finished 2021 with 3 million fewer jobs than before the pandemic began. With the Omicron variant pushing infection numbers to new peaks in early 2022, the absence of strict containment policies leaves many workers reluctant to take jobs, leaving labor supplies uncertain.

Under the Outlook’s Base Case, the economy will continue to claw its way back toward normalcy. Vaccinations and treatments will become increasingly accepted as COVID-19 gradually morphs from an acute pandemic into a long-term health concern. The Federal Reserve will gradually raise interest rates, which should successfully maintain consumers’ inflation expectations. Supply-chain issues should slowly improve, slower than markets would like but fast enough that the economic recovery is not overly disrupted.
 

To receive a full copy of the Summary or the entire 16-page “Thee-Year Economic Outlook (2022-2024)” report, contact your AMG advisor or submit a request for more information.

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