Research Roundtable: Q4 market and economic outlooks

In the home stretch! The Investment Research team gathers to discuss their predictions for Q4.

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October 7, 2021 | 5 minute read

About this episode:

In this episode, members of the Investment Research team including Chief U.S. Economist Lara Rhame, Managing Director, Investment Research, Rob Hoffman, Director, Investment Research, Kara O’Halloran and Director, Investment Research Andrew Korz gather to discuss their predictions for the remainder of 2021 and take a sneak peak into what’s to come in 2022.

Transcript excerpt:  

Kara O’Halloran (00:05):

Welcome back to Fireside, a podcast from FS Investments. My name is Kara O’Halloran and I’m a Director on our Investment Research team here and today is our last Research Roundtable outlook episode for 2021. We brought my whole team back together to talk about the home stretch of the year, where we’ve been so far, how we think things will wrap up in the fourth quarter and we’ll take a sneak peek into 2022. In the room we have Andrew Korz, another Director on the team, Laura Rhame, our Chief U.S. Economist, and Rob Hoffman, the Head of our Research team. Welcome, everyone!

Lara Rhame (00:36):

Hey, Kara.

Andrew Korz (00:37):

Hey, Kara.

Robert Hoffman (00:37):

Thanks for having us.

Kara O’Halloran (00:39):

As always, I want to set the stage a little bit. We are recording on Wednesday, September 29th. When we recorded our Q3 outlook episode back in late June, it really felt like that sweet spot where mass vaccinations were available; everything had, for the most part, just reopened. I think it was our first ever in-person podcast recording. We all talked about the trips and vacations and plane rides we were excited to take. And turning to the economy and markets, that’s when we really saw some of our strongest growth forecasts and solid returns throughout markets with not a whole lot of volatility, but a lot can change in three months. I am excited to dig into all of that. Lara, I want to start with you as we always do to just bring us up to speed on what has happened in the economy in the third quarter.

Lara Rhame (01:24):

Kara, I feel like your summary really hit on a lot of my points because I also remember that glorious moment in mid-July where we had peak GDP forecasts, reopening felt like it was really, almost as close as back to normal as, I think, I felt since February 2020. It was all driven, I think, by the tailwind of vaccines.

Lara Rhame (01:52):

Going into the third quarter, really, nobody was focused on growth. The focus was really inflation and we saw CPI as high as 5.3% in the third quarter, core CPI hit its highest in 1991. That in the third quarter was really the big focus. I think something that surprised us and continues to surprise is the fact that inflation continues to bubble up from a lot of different areas. We saw high inflation coming from commodity prices. We saw it from supply shortages, but right now, and as the third quarter progressed, I think we’ve realized that those year-on-year numbers are going to come down somewhat, and against that backdrop while inflation may remain a challenge, we’re still, I think, thinking that the Fed is going to be able to address that. Markets have really settled down and gotten comfortable with the challenge of inflation. And we’ve kind of moved back into growth because, of course, the delta variant, I think, was a huge dark cloud on that incredibly amazing period of positive growth outlook.

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Andrew Korz, CFA

Executive Director, Investment Research

Kara O’Halloran, CFA

Director, Investment Research

Lara Rhame

Chief U.S. Economist + Managing Director

Robert Hoffman, CFA

Managing Director, Credit Wealth Solutions