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.
- 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.