by Bill O’Grady, Patrick Fearon-Hernandez, CFA, and Mark Keller, CFA | PDF

In our 2022 Outlook: The Year of Fat Tails, we outlined a forecast with a higher likelihood of events outside the norm. To compensate for the unusual level of uncertainty, we promised to provide frequent updates to the forecast. This report is the second of the year. In the most recent update, we offered four scenarios for the path of monetary policy. Since we published that report in February, the world has seen even bigger changes. The war in Ukraine and the subsequent freezing of Russia’s foreign reserve assets have changed the world in a profound manner that will take years to fully determine. Nevertheless, one change we think is permanent is that globalization as we have practiced it since 1990 is over.[1] That change will have serious ramifications on financial markets.

In the past few weeks, market conditions have changed rapidly. It has become nearly impossible to construct a detailed outlook simply because the details are in flux. In order to offer some structure to our current thinking, this will be a short report with price/yield in an effort to at least provide directional guidance.

Key Forecasts:

• 10-Year Treasury: 3.60% to 3.75%, with caveats about the business cycle (see below)
• S&P 500: Range of 4200 to 3400
• Dollar: Bullish for the rest of the year
• Commodities: Very vulnerable to cyclical factors, but secular trend is favorable

Read the full report

[1] For details, see our Bi-Weekly Geopolitical Reports from March 14, March 28, April 25, and May 9. We also recommend our podcast episodes associated with these reports.