As we round the end of the first quarter of the new year, we are already seeing the warning play out from many Wall Street firms that the market’s rally is over. While the economy still looks good, returns will moderate. After the initial boom from countries returning to more normal levels of operation in light of the weakening effects of the pandemic, lingering effects in areas like the supply chain and other world economic issues are causing new challenges.

Bloomberg News compiles and presents the key investment themes and forecasts from dozens of financial firms in its annual report on the state of the stock market.

Inflation Concerns

Inflation is frequently cited from the board room to the bar-room this year. It’s often paired with terms like “rising” or “higher.” Rising prices are definitely a primary concern for the stock market and the rest of the financial world this year. Firms are somewhat divided on how the current inflation crisis will play out, but everyone agrees predictions are uncertain and monetary policy mistakes are more likely to occur this year.

The expectation is that policy will raise rates and that yields will rise, resulting in negative returns for fixed-income investors.

According to Goldman Sachs, part of the reason why valuations are elevated is that they’re more than the historical norm. When everything looks expensive, the expected return is less than 10%.

China and Pandemic After-Effects

Calls seem to agree, however, that pandemic threats are lessening. At the same time, the continued slowing of China’s economy has people concerned about significant risks. The word “China” was more than twice as often used. Bejing domestic policies have been unpredictable, and continued concerns about tensions surrounding Taiwan have everyone on edge. While China isn’t yet an uninvestable asset, several firms argued that it could still be a good investment.

Despite the media hype, digital assets were also not widely discussed. Cryptocurrency has a lot of potential, but it hasn’t yet been established as a reliable portfolio asset. ESG investing, however, seems to be a popular option. Specific strategies are hard to find, but it’s worth pursuing.

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Originally published on EtienneKiss-Borlase.net on March 2, 2022