Market Projections | November 29, 2021

Q4 2021 Investment Outlook: The Global Economy on Edge

Given all the activity this autumn in the world of economics, politics and investing, it feels like we are on the edge of something, but it is unclear what that is.

We often think of “edge” as being on the verge of disaster, but the verb means to sharpen or provide a clear border. We do not believe that we are at a point of the former and see today as a good opportunity to do the latter.

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If there is a cliff out there somewhere, and there always is, it is best managed by having all of the tools in your shed as sharp as possible. As we approach the end of this amazing year, it is an excellent time to look at your overall asset allocation in the context of your long-term goals and objectives. Think about rebalancing regimens and consider how each element of your program contributes to the totality of your investment pool.

Ask yourself these questions:

  • What role does fixed income play?
  • Do you have sufficient liquidity or more than you need?
  • Is your exposure to equity more than you have anticipated as rates have fallen and stock prices generally rose?
  • Are there other areas of investing that you should consider that may help you achieve long-term targets while providing diversification?

What is our outlook?

We continue to be neutral to target on large-cap U.S. equity relative to our long-term capital market assumptions. Our views on both non-U.S. large and small cap stocks on an unhedged basis remain a notch below neutral.

With pressure on rates increasing, we believe it will be difficult to achieve expected long-term returns on traditional U.S. and non-U.S. fixed income and that the opportunity in this asset class is to stretch a bit, not too much, into more specialized areas, such as high yield, structured credit and emerging market debt.

Our overall near-term outlook for alternative investment remains favorable. Private equity, real estate, infrastructure and energy all continue to project continually improving fundamentals and positive momentum with near-term performance anticipated to meet or modestly exceed our capital market assumptions.

What does our outlook cover?

The Q4 2021 Investment Outlook includes tables that provide a snapshot of our forward-looking observations on the key macroeconomic factors driving markets and the direction of specific asset classes.

Global macro signals and outlook

We cover these global macro signals for developed markets and emerging markets:

  • GDP growth
  • Inflation
  • Policy rate
  • Currency
  • Equity valuations

Asset class signals and outlook

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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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. On all matters involving legal interpretations and regulatory issues, investors should consult legal counsel.

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