Let’s face it, the last three years have been challenging for investors. The global pandemic has had a domino effect on so many aspects of our lives. In one way or another, we have all faced:
- Health risks – the ongoing possibility of contracting the COVID-19 virus
- Inflation risks – prices of goods and services are rising globally
- Struggles in the bond market – the traditional anchor to a balanced portfolio, bonds have fared poorly this year due to inflation and rising interest rates
- Repricing of growth assets – declining liquidity, slower economic growth and persistent inflation hurting equities and other growth assets
- Geopolitical risks – the war in the Ukraine, a deepening political divide in the U.S., and growing food and supply shortages
Meanwhile, we all face our own personal struggles. Life happens, whether we are prepared or not.
Add to this list of ongoing concerns the increasing risk of a global recession and you can see the challenges investors are facing on their path towards financial security. Inflationary pressures and the aggressive pace of tightening by many central banks—including the U.S. Federal Reserve—is raising the risk of a global economic downturn. While our strategists believe that risks are higher in other regions than in the U.S., much depends on the Fed’s actions. They also note that U.S. household and business balance sheets are in good shape and should protect against a more severe downturn. In any case, it’s likely your clients are worried.