Wells Fargo Investment Institute’s 2022 Midyear Outlook: ‘Faster, Further, and Fragile’
June 15 2022 - 12:00PM
Business Wire
Wells Fargo Investment Institute (WFII) today released its 2022
Midyear Outlook: Faster, Further, and Fragile. WFII anticipates
that while the economic cycle runs faster and the interest rate
increases run further, the economy and capital markets will remain
fragile. WFII believes the U.S. economy is signaling a mild
recession for the end of 2022 and into early 2023. If inflation and
monetary tightening ease in 2023, as WFII anticipates, a nascent
economic recovery that markets may project into 2024 is expected.
The report examines and identifies where it may pay investors to
take risks — and what investment opportunities may arise — as they
navigate these challenging times.
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Wells Fargo Investment Institute 2022
Midyear Outlook (Photo: Wells Fargo)
“Thus far, 2022 has been trying for investors, with negative
year to date returns for both equities and bonds,” said Darrell
Cronk, chief investment officer for Wealth & Investment
Management. “As we look into the second half of the year, important
risks remain. WFII views risk not strictly as an unknown but as
something to measure, and as part of a disciplined decision process
to manage within a portfolio.”
The report provides WFII’s economic and market forecasts, as
well as the outlook and preferred areas of investment for each of
the following asset groups:
- Global equities: Slowing earnings per share (EPS)
growth will be met with declining valuations, but will likely
generate moderate year-end 2022 equity price gains from current
levels. For 2023, expect a recession to shrink EPS, but market
expectations for recovery later in 2023 should lift valuations and
equity markets by year-end. We favor U.S. large-cap and U.S.
mid-cap equities over international equities and favor quality
among equity sectors.
- Global fixed income: The Federal Reserve has
taken a decidedly more aggressive approach toward monetary policy,
even as the window of opportunity to engineer an economic soft
landing narrows. WFII prefers short-term and intermediate-term
investment-grade maturities while interest rates have some room to
rise. We prefer not to extend down the credit spectrum into
high-yield fixed income.
- Global real assets: Commodities had a strong start to
the year, but gains are likely to moderate into year-end before
accelerating again in 2023. For yield investors, we favor midstream
energy C-corporations, and opportunities may arise in public real
estate investment trusts.
- Global alternative investments: Expect Global
Macro and Relative Value strategies to provide critical late-cycle
diversification and, in the case of Relative Value, incremental
income at a time when inflation-adjusted yields remain low. Credit
stress is likely to build, which eventually may lead to investment
opportunities in Event Driven and Private Debt strategies, which
focus on special situations and distressed debt.
WFII’s analysis of current and emerging market conditions leads
to the following top five portfolio ideas for the second half of
the year:
- Build portfolio resilience with diversifiers.
- Be defensive on equity exposure late in an economic cycle.
- Add to fixed-income holdings judiciously in a rising-rate (and
inflationary) environment.
- Match cash allocations to time horizon.
- Seek to mitigate downside risk with alternative investments,
including hedge funds.
Learn how to join the WFII Midyear Outlook investor call today,
June 15, at 4:15 p.m. Eastern time.
Investment and Insurance Products
are:
• Not Insured by the FDIC or Any
Federal Government Agency
• Not a Deposit or Other Obligation of,
or Guaranteed by, the Bank or Any Bank Affiliate
• Subject to Investment Risks,
Including Possible Loss of the Principal Amount Invested
Risk Disclosure
Forecasts and targets are based on certain assumptions and on
our current views of market and economic conditions, which are
subject to change.
All investing involves risks, including the possible loss of
principal. There can be no assurance that any investment strategy
will be successful and meet its investment objectives. Investments
fluctuate with changes in market and economic conditions and in
different environments due to numerous factors, some of which may
be unpredictable. Asset allocation and diversification do not
guarantee investment returns or eliminate risk of loss. Each asset
class has its own risk and return characteristics, which should be
evaluated carefully before making any investment decision. The
level of risk associated with a particular investment or asset
class generally correlates with the level of return the investment
or asset class might achieve. Some of the risks associated with the
representative asset classes include: Stock markets,
especially foreign markets, are volatile. Stock values may
fluctuate in response to general economic and market conditions,
the prospects of individual companies, and industry sectors.
Foreign investing has additional risks including those associated
with currency fluctuation, political and economic instability, and
different accounting standards. These risks are heightened in
emerging markets. Bonds are subject to interest rate,
credit/default, liquidity, inflation and other risks. Prices tend
to be inversely affected by changes in interest rates. The
commodities markets are considered speculative, carry
substantial risks, and have experienced periods of extreme
volatility. Investing in a volatile and uncertain commodities
market may cause a portfolio to rapidly increase or decrease in
value which may result in greater share price volatility.
About Wells Fargo Wealth & Investment Management
Wells Fargo Wealth & Investment Management (WIM) is a
division within Wells Fargo & Company. WIM provides financial
products and services through various bank and brokerage affiliates
of Wells Fargo & Company and is one of the largest wealth
managers in the U.S., with more than $2 trillion in client assets.
WIM provides personalized wealth management, brokerage, financial
planning, lending, private banking, trust, and fiduciary products
and services to affluent, high-net worth, and ultra-high-net worth
clients. WIM operates through advisors in Wells Fargo Advisors,
independent brokerage offices, and digitally through Intuitive
Investor and WellsTrade, as well as through advisors in The Private
Bank and other banking centers.
Wells Fargo Investment Institute, Inc. is a registered
investment adviser and wholly-owned subsidiary of Wells Fargo Bank,
N.A., a bank affiliate of Wells Fargo & Company.
About Wells Fargo
Wells Fargo & Company (NYSE: WFC) is a leading financial
services company that has approximately $1.9 trillion in assets,
proudly serves one in three U.S. households and more than 10% of
small businesses in the U.S., and is a leading middle market
banking provider in the U.S. We provide a diversified set of
banking, investment and mortgage products and services, as well as
consumer and commercial finance, through our four reportable
operating segments: Consumer Banking and Lending, Commercial
Banking, Corporate and Investment Banking, and Wealth &
Investment Management. Wells Fargo ranked No. 37 on Fortune’s 2021
rankings of America’s largest corporations. In the communities we
serve, the company focuses its social impact on building a
sustainable, inclusive future for all by supporting housing
affordability, small business growth, financial health, and a
low-carbon economy. News, insights, and perspectives from Wells
Fargo are also available at Wells Fargo Stories.
Additional information may be found at www.wellsfargo.com |
Twitter: @WellsFargo.
Cautionary Statement about Forward-Looking Statements
This news release contains forward-looking statements about our
future financial performance and business. Because forward-looking
statements are based on our current expectations and assumptions
regarding the future, they are subject to inherent risks and
uncertainties. Do not unduly rely on forward-looking statements as
actual results could differ materially from expectations.
Forward-looking statements speak only as of the date made, and we
do not undertake to update them to reflect changes or events that
occur after that date. For information about factors that could
cause actual results to differ materially from our expectations,
refer to our reports filed with the Securities and Exchange
Commission, including the “Forward-Looking Statements” discussion
in Wells Fargo’s most recent Quarterly Report on Form 10-Q as well
as to Wells Fargo’s other reports filed with the Securities and
Exchange Commission, including the discussion under “Risk Factors”
in our Annual Report on Form 10-K for the year ended December 31,
2018, available on its website at www.sec.gov.
CAR-0622-01751
News Release Category: WF-ERS
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version on businesswire.com: https://www.businesswire.com/news/home/20220615005266/en/
Media Sarah Kerr, 917-588-5919
Sarah.Kerr@wellsfargo.com
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