The U.S. economy is moving from a post-reopening boom phase toward a moderating period, which, depending on policy prescription, may end up feeling like a mid-cycle slowdown in the second half of 2022, according to Mitsubishi UFJ Financial Group’s 2022 U.S. macro strategy outlook.
Authored by George Goncalves, head of U.S. macro strategy at MUFG, the report outlines key themes for 2022 tied to a quicker pace of Federal Reserve tightening, fiscal policy inflexibility, global and geopolitical issues and the potential tightening of financial conditions against a presently healthy U.S. economic backdrop.
“The risk of less fiscal support ahead, combined with the Federal Reserve combating inflation in 2022, could end up tightening financial conditions materially,” Goncalves wrote. “This could ultimately push the economy back to pre-COVID-19 stagnation or worse — end up shortening the business cycle.”
Eric Ruff, credit desk analyst at MUFG; Glenn Schultz, head of mortgage-backed security modeling and strategy at MUFG; and Bill Matthews, leveraged finance credit desk analyst at MUFG also contributed to this report.
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