2022 Investment Outlook (Part 2) – Stocks and Bonds

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Stocks are priced for perfection. Bonds trade at historically low yields despite 7% inflation. What could go wrong?

As fiscal and monetary support for the economy and markets wane, valuation extremes are in the crosshairs. While the setup for 2022 is not looking as friendly as 2021, the environment can change quickly.

For more on the macroeconomic drivers supporting this forecast, please read Part 1 of our 2022 investment outlook – Tailwinds Shift To Headwinds.

Outlook for Stocks


As shown below, as I have highlighted in many articles, valuations are at or near record levels. While nothing limits valuations from rising further, a reversion to the mean can result in losses of greater than 40%.