Making Market Sense of Rates, Russia and Real Inflation

Portfolio strategists explain why fears about rates, energy prices, inflation and recession may be overblown.

Natixis Investment Managers Solutions Portfolio Strategists Jack Janasiewicz and Garrett Melson offer their take on some of the hottest topics in today’s capital markets:

  • While the first Federal Reserve rate hike happened as expected, the path of future hikes isn’t assured; it will be data dependent.
  • There are three likely scenarios for the Russia/Ukraine conflict, but it’s less about negotiations between Russia and Ukraine than between Russia and the West.
  • Inflation is still top of mind and energy prices are likely to remain elevated even when we have a resolution to the conflict.
  • But today’s high gas prices are not your parents’ energy shock. Energy intensity has fallen significantly since the 1970s – think more fuel-efficient cars and appliances.
  • Risk of recession may be overblown, as household and corporate balance sheets are still strong post-Covid.
  • US consumption data is ticking higher and is still below the pre-pandemic numbers. Consumers are engaging in revenge spending, with upticks in airline reservations and vacations despite complaints about higher prices.
  • The Fed isn’t tightening into a slowdown: Demand remains strong and we are likely in the early to mid-stages of recovery.
This material is provided for informational purposes only and should not be construed as investment advice. The views and opinions contained herein reflect the subjective judgments and assumptions of the authors only and do not necessarily reflect the views of Natixis Investment Managers, or any of its affiliates. The views and opinions are as of March 17, 2022, and may change based on market and other conditions. There can be no assurance that developments will transpire as forecasted, and actual results may vary.

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