Quarterly Outlook: Q1 2022

Q1 Economic Outlook highlights include:

• Russia’s invasion of Ukraine has caused a stagflationary shock and a surge in geopolitical tensions that roiled economies and financial markets worldwide.
• The baseline assumption is that geopolitical tensions are not anticipated to significantly escalate further, that sanctions remain in place, and that the shock to commodities, inflation, and GDP is persistent on a two-year horizon.
• The Ortec Finance momentum indicator is expected to remain mildly positive, which balances the downward pressure resulting from the sharp rise in interest rates with an anticipated partial recovery from a weak first quarter
• Rising inflation and increased investor concerns worsen the Ortec Finance Business Cycle Indicator outlook on a one-year horizon. The anticipated contractionary phase of the business cycle translates to below trend equity returns and above trend credit spreads on a two-year horizon.
• The anticipated moderation in economic activity combined with persistent supply-driven inflationary shocks and faster prospective monetary tightening, suggest increased stagflation risks, which translate to a cautious outlook for risky assets.
• The outlook remains surrounded by substantial uncertainty associated with the war in Ukraine, as well as inflation risks. Accordingly, market volatility and downside risk are expected to remain elevated in the short run.

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Previous Quarterly Outlook

Interested in our previous quarterly outlook? Download the Q4 2021 Quarterly Outlook here.