Market Projections | August 31, 2022

Q3 2022 Investment Outlook: Perspectives on a Challenging Year

After a difficult first quarter in 2022, the second quarter did not offer any relief. In our recent article, “Change is Difficult,” we discussed how this year has been characterized by massive disruption, including the change to the market backdrop, from double-digit positive returns of 2021 to both stock and bond markets’ double-digit negative returns through June 2022.

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There is a behavioral finance theory, called recency bias, that says people put too much emphasis on recent experiences and extend that experience into the future. This may cloud your judgment on what lies ahead.

The opposite of recency bias is the gambler’s fallacy, where you believe that because the most recent past has occurred and at certain frequency, the opposite is more likely to occur in the future. This is more a “reversion-to-the-mean” type of hypothesis.

In our latest Investment Outlook, we present both theorems as the perfect interaction of where we sit today.

What is our outlook?

Our best guess — and, given the environment, it is a guess — is that while we have seen the worst, this is not a straight path upward for stocks or downward for interest rates.

Investors should keep in mind that we have seen inflation before, we have seen interest rate rises before and we have endured market declines before. Take a step back and think about your recency bias as the headlines of pessimistic outlooks abound.

What does our outlook cover?

The Q3 2022 Investment Outlook includes tables that provide a snapshot of our forward-looking observations on the direction of specific asset classes.

Specifically, for 24 asset classes, we select one of five outlook signals based on our 12–18-month perspective relative to our 10+-year CMAs. The signals range from an above-normal return outlook to a below-normal return outlook.

The asset classes include equities, fixed income and these alternatives:

  • Hedge funds
  • Multi-asset class strategies
  • Private equity
  • Real estate
  • Infrastructure
  • Commodities
  • Energy
  • Timber
  • Farmland
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Segal Marco Advisors provides consulting advice on asset allocation, investment strategy, manager searches, performance measurement and related issues. The information and opinions herein provided by third parties have been obtained from sources believed to be reliable, but accuracy and completeness cannot be guaranteed. This article and the data and analysis herein is intended for general education only and not as investment advice. It is not intended for use as a basis for investment decisions, nor should it be construed as advice designed to meet the needs of any particular investor. Please contact Segal Marco Advisors or another qualified investment professional for advice regarding the evaluation of any specific information, opinion, advice, or other content. Of course, on all matters involving legal interpretations and regulatory issues, investors should consult legal counsel.

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