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Nationwide Market Insights: Gathering headwinds still not enough to derail markets, economy

January 11, 2022

The year ended on a positive note for many asset classes even as a further climb in inflation, a hawkish turn from the Federal Reserve, and the lingering pandemic all contributed to bouts of volatility. Stocks rose, the yield curve flattened, and credit spreads were mixed. Commodity prices and the dollar both climbed.

Markets continue to be supported by a robust economic backdrop, which is in turn fueling a surge in corporate profits. At the same time, inflation and the Fed response that it could elicit are growing risks and will likely be the defining themes of the year ahead. For now, the rapidly developing feedback loops and the measured approach from monetary policymakers continue to point to the potential for another long and fruitful cycle.

See Nationwide Economics’ perspective on the market and economic forces influencing investment planning and retirement.

Highlights from this quarter’s report:

Financial Markets:

  • Sustained inflation would weigh on profit margins. Page 7
  • Stocks rise modestly during tightening cycles. Page 9
  • There is a wide performance gap between the S&P 500 and many global benchmarks. Page 13

U.S. Economy

  • The Fed overestimated rate hikes in the last cycle. Page 28
  • Inflation is a lagging indicator. Page 32
  • Prolonged inflation has been rare in U.S. history. Page 33

Hear more perspective and insight

Nationwide’s Deputy Chief Economist Bryan Jordan provides highlights and perspective of the Nationwide Market Insights quarterly report for the beginning of Q1 2022.

View the quarterly report while you listen to this podcast.