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Investment Outlook

Q4 2022

Central Banks Are Searching for a Smooth Landing

Fear of the unknown has put the capital markets on a bumpy path in 2022. Global economic growth expectations are falling fast due to aggressive rate-hike campaigns to tame inflation. And questions about whether central banks can contain soaring prices without driving the economy into a severe recession loom over investors’ heads. As we’ve seen throughout this year, investors dislike uncertainty.

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Key Takeaways

Investors are on recession watch as policymakers aggressively hike interest rates and tighten the money supply to catch up with record-high inflation.

  1. Labor market holds the key in the U.S.

    With two consecutive quarters of contraction on the books, the strong labor market appears to be the primary barrier to a recession in the U.S.

  2. Slowing profit growth puts the focus on individual companies.

    Due to rising economic and geopolitical pressure, we think high-quality companies less dependent on broad economic growth are most likely to outperform.

  3. Emerging markets outlook is stabilizing.

    Concerns about Chinese regulations on businesses are easing, and supply chain pressures may abate as the government explores alternatives to lockdowns for dealing with COVID outbreaks.

  1. CHIPS Act is another tailwind for onshoring.

    The law provides an incentive for the semiconductor industry to reduce its reliance on Asian manufacturers, a positive for U.S. chipmakers and companies that supply chipmaking parts and equipment.

  2. Heightened bond market volatility is likely.

    With the U.S. sliding toward recession, we think a more cautious approach to credit risk is warranted. Inflation protection also remains paramount.

Q4 2022 Investment Outlook Resources

References to specific securities are for illustrative purposes only, and are not intended as recommendations to purchase or sell securities. Opinions and estimates offered constitute our judgment and, along with other portfolio data, are subject to change without notice.

International investing involves special risk considerations, including economic and political conditions, inflation rates and currency fluctuations.

Investment return and principal value of security investments will fluctuate. The value at the time of redemption may be more or less than the original cost. Past performance is no guarantee of future results.

Historically, small- and/or mid-cap stocks have been more volatile than the stock of larger, more-established companies. Smaller companies may have limited resources, product lines and markets, and their securities may trade less frequently and in more limited volumes than the securities of larger companies.

Diversification does not assure a profit nor does it protect against loss of principal.

Generally, as interest rates rise, bond prices fall. The opposite is true when interest rates decline.

Past performance is no guarantee of future results. Investment returns will fluctuate and it is possible to lose money.

The opinions expressed are those of American Century Investments (or the portfolio manager) and are no guarantee of the future performance of any American Century Investments' portfolio. This material has been prepared for educational purposes only. It is not intended to provide, and should not be relied upon for, investment, accounting, legal or tax advice.