Market Outlook · March 31, 2022

Making Sense: March Highlights

Brent Ciliano

CFA | SVP, Chief Investment Officer

Phillip Neuhart

SVP, Manager of Institutional Portfolio Strategy


The US economy is slowing, and inflationary pressures remain high. Is a recession on the horizon?

We're entering a new, lower growth phase of economic expansion—the economy is facing Federal Reserve rate increases, inflation at a 40-year high and supply chain disruptions.

Does that mean we're heading towards a recession? While the risk of inflation has risen, we don't have a recession in our base case for the next 12 months.

However, we do think we're entering a strong mid-cycle slowdown. Should we slip into a recession down the road, remember where we are now—the labor market is strong and corporate earnings are at record highs. Both, along with elevated nominal GDP growth, would provide some cushion in the event of a recession.

Bottom line for the Fed, interest rates and inflation

The Fed has acknowledged that it's going to materially hike rates, so we now have markets and a federal reserve that are more in line.

Bond yields have come to terms with future hikes.

Inflation is sky high and the Russian invasion is exacerbating the issue.

What do we believe?

  • The Fed will hike numerous times this year but won't reach the higher end of the market expectations.
  • Inflation will moderate later this year but will remain elevated.
  • Bond yields have adjusted significantly in advance of fed actions, so it isn't a forgone conclusion that Treasury yields will continue to move up in a straight line.

Bottom line for markets

Wall Street consensus S&P 500 12-month forward price target is 5,278.60 or 16.8% return from close on March 24.

Our 2022 S&P 500 price target is 4,900 equating to around an 3% growth over 2021, but we expect a much more volatile year.

We believe the full market cycle can last through year-end 2023 and potentially reach 5,500 greater (2024 EPS of $271 at around 20.5 times), but much can and will likely change along the way.

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