2022 Financial Markets Outlook

2022 Financial Markets Outlook: Going the Distance

even for the bullish among us, the run in global stocks last year was exceptional. More than 90% of the primary equity indices tracked by Bloomberg had a positive total return, with an average gain in excess of 23%.39 Along the way, the S&P 500 achieved 70 all-time closing highs and the MSCI EAFE index finally exceeded the high-water mark it had reached prior to the GFC. Collectively, global equity market value increased by more than $18 trillion in 2021.40

After such a strong sprint, it would be natural for investors to question the endurance of global stocks. To be sure, there is no shortage of concerns, including the evolution of the coronavirus, high inflation, less accommodative monetary policy and geopolitical tensions. Today’s historically high valuations also leave investors with a narrower margin of safety for absorbing any adverse developments. This is particularly true in the US, where valuations have been cheaper at least 90% of the time historically. Even global bonds are expensive,