In this addition of LPL Street View, LPL Financial Director of Research Marc Zabicki discusses directional change and why capital markets have shaken up a bit during the start of 2022.

Recently, market participants have faced a directional change regarding their expectations of Federal Reserve (Fed) policy. Investors now have reason to believe that the Fed will implement more rate hikes in 2022 than originally anticipated. Due to the recent directional change in potential economic growth, market forecasters are now expecting U.S. GDP growth to decelerate. Additionally, market participants have experienced a directional change in fiscal policy. They are now not expecting the same degree of tailwind in fiscal policy as they saw in 2021 due to fading COVID-19 stimulus and post COVID-19 stimulus. Inflation pressures have also caused a directional change in consumer confidence and economic confidence.

This directional change has resulted in a change of premium that investors are willing to pay for risky assets.  This is partly due to the recent shift in asset prices which has caused the investment landscape to become more uncertain than it was in 2021. This doesn’t mean that you shouldn’t have a formidable allocation of risk-based assets in your portfolio. What it does mean is that directional change in many data series should cause you to reduce your return expectations and prepare for more price volatility ahead.

IMPORTANT DISCLOSURES

This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of principal. Any economic forecasts set forth in the podcast may not develop as predicted and are subject to change.

References to markets, asset classes, and sectors are generally regarding the corresponding market index. All indexes are unmanaged and cannot be invested into directly. Index performance is not indicative of the performance of any investment and do not reflect fees, expenses, or sales charges. All performance referenced is historical and is no guarantee of future results.

Any company names noted herein are for educational purposes only and not an indication of trading intent or a solicitation of their products or services. LPL Financial doesn’t provide research on individual equities. All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.

All index data is from FactSet.

All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.

This Research material was prepared by LPL Financial, LLC. 

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