A strong economy is hurtling toward two big challenges: Inflation and a Fed rate hike cycle. Markets are jittery, as this combination has already caused volatility and raises the risk of a possible recession. We break down where there is room for the economy to moderate and where it could outperform, and how investors can balance solid growth with rising policy uncertainties.
Key takeaways
- We project economic growth of 3.0% in 2022, as business investment has room to ramp up through capital spending and inventory restocking.
- While inflation may have peaked in March, high food and energy prices will stress households and keep the Fed on a hawkish path.
- Markets have already repriced for a storm, despite solid fundamentals.
