Highlights of the April 2022 Investment Framework
Our Investment Framework contains the views and opinions of Putnam's Equity, Fixed Income, and Global Asset Allocation teams.
Equities
S&P 500
2022 target
4,500
Sectors favored
Financials | Energy | Industrials | Materials | Technology
Earnings
Corporate earnings estimates for the S&P 500 index companies are being revised higher, but price multiple compression is already underway due to inflation and higher nominal yields.
Trends
Value likely to outperform growth.
U.S. is likely to outperform.
Fixed Income
10-year Treasury yield year-end forecast
2.75%
Corporate credit: Fundamentals are strong, but technicals have peaked; IG and HY spreads have widened to pre-Covid levels.
Mortgage credit: Commercial mortgages offer value as people return to offices, shopping, and travel.
Municipal bonds: These bonds offer meaningful diversification as both fundamentals and valuations continue to improve.
This high-quality asset class are a diversifying investment option especially relative to equities as both fundamentals and valuations improve.
Risks to monitor
The pace of economic growth, inflation and rising interest rates. We expect eight rate hikes by the Fed in 2022 and for the federal funds rate to finish the year at 2.25%—2.50%.
Economy
Real GDP forecast for 2022
United States
3.00%
Europe
2.75%
Emerging markets
4.25%
Opportunities
Stocks of high-quality earners across market-cap size and investment style, along with structured credit
Inflation
Forecast for 2022 core PCE
4.00%

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Yield curve inversion and market performance
At its March meeting, the Federal Reserve raised the federal funds rate by 25 basis points. The central bank also indicated that this is likely the start of a tightening cycle, as policymakers attempt to dampen the elevated levels of inflation seen since the start of the pandemic. Markets seem keenly focused on the yield curve in the United States, and whether its potential inversion would be an indicator that a recession is on the horizon. The most common relationship being monitored is the difference between 2-year and 10-year U.S. Treasury yields.
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Market performance during Fed tightening cycles
In this analysis we assess asset class performance during prior cycles of Federal Reserve monetary tightening. Specifically, we measured performance across interest rates, equities, and fixed income the year after the start of rate hike cycles. Additionally, we looked at the impact on U.S. 10-year note yields as well as the slope of the U.S. Treasury curve.
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A look at the Federal Reserve’s 2014 taper
With the Federal Reserve nearing a decision to begin tapering its asset purchases, we thought it would be beneficial to look at what occurred the last time the Fed reduced its asset purchases. In this analysis, we looked at the events surrounding the 2014 taper, how different markets and asset classes performed during the period, and what we believe may (and may not) be expected this time.
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Post-recession market trends
How do different asset classes perform coming out of recession? Is there a drop off in performance in the second year of a recovery relative to the first year? In this analysis we look at asset class performance in the two calendar years after a recession ends.
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A season for stock returns
Is there seasonality to equity market returns over time and, if so, is it repeatable, measurable, and significant? We turned to one of our favorite sources for market information, “The Stock Trader’s Almanac” to find the answers.
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Tracking PMI data and forward equity returns
We believe real economic growth is likely to reach levels not seen in the United States since 1983–1984. Our best estimate is for real GDP to approximate 6.5% year-on-year growth in 2021.
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What do yields reveal about inflation expectations?
Investors can monitor these relationships to understand the underlying drivers of nominal yields.
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Growth, Value, and Recessions
What equity investment style performs best as the economy enters a recession?
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A look at inflation and investment performance
Investors are concerned about rising inflation going forward. We researched recent history to better understand how different asset classes perform during periods of increasing core inflation as measured by the Personal Consumption Expenditure Core Price Index.
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The January Barometer
Devised by Yale Hirsch in 1972, the January Barometer states that as the S&P 500 goes in January, so goes the year. The indicator has registered 10 major errors since 1950, for an 85.7% accuracy ratio.
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U.S. dollar and trends in emerging markets
Studying market history may help provide a useful framework for investors as we navigate the recession of 2020. We looked back at the 5 recessions since 1980 as a guide.
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Economic expansions and equity returns
What can history tell us about the length of economic expansions and recessions? And further, what can investors expect from the stock market during economic expansions?
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Trends in small - and large-cap stocks during recessions
Studying market history may help provide a useful framework for investors as we navigate the recession of 2020. We looked back at the 5 recessions since 1980 as a guide.
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Growth, Value, and Recessions
What style performs best as the economy enters a recession? What style performs best as the economy exits a recession?
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S&P 500 Return Attribution
How have a handful of stocks impacted the year to date return of the S&P 500 index?
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Chris Galipeau
Chris is the Team Leader of the Capital Market Strategies team, communicating Putnam's active investment views to help them have a positive impact on client portfolios. He is a member of the CFA Society Boston and the Market Technicians Association, and holds Series 7 and 63 licenses with FINRA. Chris joined Putnam in 2013 and has been in the investment industry since 1992.
Follow him on LinkedIn and listen to his Active Insights podcast.

Rick Polsinello, Jr., CIMA®
Rick is a Senior Market Strategist on the Capital Market Strategies team, conducting economic and financial market research and sharing insights with Putnam clients. Previously at Putnam, he was a Senior Investment Director, specializing in fixed income. He holds his Series 7, 24, and 66 licenses with FINRA. Rick joined Putnam in 2013 and has been in the investment industry since 2002.
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Taylor Topousis, CFA
Taylor is an Capital Market Analyst on the Capital Market Strategies team, communicating Putnam's investment views and opinions to Putnam clients and generating new economic and financial market research for the team. He is a member of the CFA Society Boston and has been in the investment industry since he joined Putnam in 2016.
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