Research report

Q1 2022 3D Report: Low Vibration

The global economic order is likely at a crossroads, and investors will need help navigating what is coming.

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April 29, 2022 | 20 minute read

Late cycle “vibration.” This was the term I used at the start of the year to describe my outlook for the first half of 2022. As we enter the second quarter, the bearishness is palpable – and rightfully so. Inflation continues to run at levels not seen in two generations, forcing the Federal Reserve into rapid tightening. The war in Ukraine rages on while China’s Zero COVID Policy threatens global economic growth. Investors searching for certainty over the next few months are likely to come up empty-handed.

The news is not all dire. Despite inflation and global economic uncertainty, estimates for earnings over the next two years continue to be revised upward. Companies have been able to ride the wave of high nominal GDP growth and operating leverage to impressive results. In the short-term, we are likely to see a debate within markets over the durability of earnings into the second half of the year. Beyond the current market debate, we strongly believe it is time that investors begin to think about what’s next. The global order that has governed for the past two decades is ending, and new paradigms are emerging – ones that are likely to provide fertile ground for dynamic investors.

This information is educational in nature and does not constitute a financial promotion, investment advice or an inducement or incitement to participate in any product, offering or investment. FS Investments is not adopting, making a recommendation for or endorsing any investment strategy or particular security. All views, opinions and positions expressed herein are that of the author and do not necessarily reflect the views, opinions or positions of FS Investments. All opinions are subject to change without notice, and you should always obtain current information and perform due diligence before participating in any investment. FS Investments does not provide legal or tax advice and the information herein should not be considered legal or tax advice. Tax laws and regulations are complex and subject to change, which can materially impact any investment result. FS Investments cannot guarantee that the information herein is accurate, complete, or timely. FS Investments makes no warranties with regard to such information or results obtained by its use, and disclaims any liability arising out of your use of, or any tax position taken in reliance on, such information.

Any projections, forecasts and estimates contained herein are based upon certain assumptions that the author considers reasonable. Projections are necessarily speculative in nature, and it can be expected that some or all of the assumptions underlying the projections will not materialize or will vary significantly from actual results. The inclusion of projections herein should not be regarded as a representation or guarantee regarding the reliability, accuracy or completeness of the information contained herein, and neither FS Investments nor the author are under any obligation to update or keep current such information.

All investing is subject to risk, including the possible loss of the money you invest.

Andrew Korz

Director, Investment Research

Brian Cho, CFA

Managing Director, Head of Quantitative Research, FS Chiron Funds

Ryan Caldwell

Managing Director, FS Investments

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