Taking Stock: Q2 2022 Equity Market Outlook

Seeking resilience. 2022 started with rising interest rates, high inflation and unthinkable violence and human tragedy in Europe. Uncertainty is high, investing is more complicated and, we believe, active stock selection is more important. As Q2 begins, we see:

  • Opportunity to add to stocks unduly punished in the downturn
  • Longer-term potential in value-oriented strategies
  • U.S. stocks holding an edge across global asset classes

Market overview and outlook

A confluence of negative factors set U.S. stocks up for a difficult start to 2022, with the S&P 500 recording its worst January since 2009 and officially hitting correction territory (a 10%+ decline) in February. Growth-oriented stocks were at the epicenter of the pain amid fears of rising rates and a slowing economy.

We see both a short- and longer-term opportunity taking shape. In the near-term, we believe indiscriminate selling has created attractive entry points, particularly into some high-growth-potential stocks. At the same time, we believe investors should prepare for a longer-run regime shift as the once familiar slow-growth, low-rate environment transitions to a new world order that may warrant greater selectivity and a rebalance toward value.

The virtues of an active approach to both stock selection and risk management can be most evident at times of significant market disruption.