Advisor Resources
Easing Inflation Fears
When inflation is rising and clients are anxious, you want to have productive conversations that help them cope.
Get big-picture market insights, behavior-based perspective to make the human connection, and portfolio builders to help you do it.
Reopening Economies
The world is recovering from the most extensive, pandemic-related shutdowns in a century.
Supply-Chain Snarls
Supply-chain disruptions continue to affect everything from computer chips to food and beverages.
Geopolitical Instability
Europe is experiencing its largest war since World War II and facing energy and commodity shortages.
Global Monetary Policy Shifts
Central banks are reigning in massive support and trying to tamp down prices by raising interest rates.
Economic Outlook: What’s Ahead?
Our investment professionals see three possible scenarios—stagflation, recession, and growth surprise—ahead for the economy. Here’s their take on which is most likely, plus steps investors can take to prepare for each one.
Our Take: Stagflation is the most likely scenario
We expect inflation to peak and gradually subside later this year, but at a much slower pace than most investors expect. We expect long-term inflation to settle at a higher rate than we’ve been used to it sitting.
Potential Investment Implications
Inflation-protected strategies, particularly with short durations, remain attractive while interest rates rise and inflation remains elevated.
Higher-quality short-duration strategies may offer benefits if yield outweighs the effects of spread widening.
A focus on credit quality will be important, given the pressures on corporate fundamentals from inflation, rising rates and muted growth.
Our Take: Recession Is a Mounting Risk
While not our base case for 2022, recession risk is on the rise. Treasury yields and inflation are likely to fall in this case. We expect credit spreads to widen more significantly in a recession versus stagflation.
Potential Investment Implications
Diversified strategies with duration exposure may offer performance advantages should interest rates decline.
Inflation strategies still appear attractive, given higher-than-average inflation rates.
While credit-sensitive securities may offer income benefits, a more cautious approach is warranted while the economy contracts.
Our Take: Growth Surprise Is the Least Likely Scenario
Although unlikely, there’s a small possibility of a growth surprise, particularly if the Russia/Ukraine conflict resolves quickly.
Potential Investment Implications
Credit-sensitive securities, such as high-yield bonds and bank loans, may offer potential outperformance. These types of investments have historically benefited during economic expansions.
Inflation strategies offer potential advantages should inflation continue to climb.
Duration strategies may underperform as interest rates rise.
Advisors, We’re Here to Help
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Catch Up On Inflation Insights
Human Connection
Understanding Investors’ Biases
Financial stress can bring out perceptions and biases that lurk under the surface. Clients can get diverted from the path you’ve laid out together.
Knowing more about these biases can help you guide your clients to make better decisions. Get insights from experts in behavioral science including author and Harvard professor Cass Sunstein. View full bio
Inflation Fears Can Bring Out Biases
A few biases often come to the fore during economic stresses such as high inflation.
“Having awareness of biases, such as overconfidence, loss aversion, or recency bias can help people make really good choices.”
Professor Cass Sunstein, Harvard University, explains.
Explore Behavioral Insights
Apply Decision Hygiene
Explore Thinking "Systems"
Explain Why a Precommitment Plan
Behavioral content Cass Sunstein ©2022 All Rights Reserved
Advisors, We’re Here to Help
Let’s discuss your clients’ specific needs.
This information is for educational purposes only and is not intended as investment or tax advice.
There is no guarantee that the investment objectives will be met.
Diversification does not assure a profit nor does it protect against loss of principal.
The information is not intended as a personalized recommendation or fiduciary advice and should not be relied upon for, investment, accounting, legal or tax advice.