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On Jan. 13, continuing a 42-year tradition, the Executives’ Club of Chicago brought together an expert panel for the much-anticipated Annual Economic Outlook.

With nationally syndicated columnist Terry Savage moderating, panelists discussed prospects for the pandemic-roiled economy. Then each participant answered this juicy question: What would you do today with $100,000 to invest? 

First, though, Savage polled audience members about 2022 prospects.

Nearly everyone predicted higher interest rates, while about two-thirds said the Dow Jones Industrial Average would finish the year mostly unchanged from 2021. More than half said inflation would slow to below 6%. 

It’s a long time from January to December  — especially during a crisis — but our experts accepted the challenge of predicting market performance.

“Remember, there’s a fine line between being wrong and being early. After all, a long-term investment is nothing more than a short-term investment that failed.”

—Dr. Bob Froehlich, Owner, Kane County Cougars Baseball Club; Former Vice Chairman, Deutsche Asset Management

Diane Swonk, chief economist, Grant Thornton LLP, said economic growth will “easily” cross 3%. She sees slowing inflation and steadying markets, with the Dow ending the year where it began, at about 36,500. Here are more of her thoughts:

“Labor shortages are causing major closures and disruptions, and in many ways mimicking a mandated lockdown. Even though it’s not a lockdown, it’s much more messy and chaotic. … The silver lining is omicron descends almost as fast as it ascends.

I am very worried now that, although we may or may not be in a housing bubble yet, we are getting close. The good news is we’ve got a lot more equity in our homes and a lot more cushion.

China likely will flatline this year. …You’ve got inflation everywhere, even where economies are stagnating. Not the United States, which is off of a boom, but I worry about the spillover effects.”

—Diane Swonk, Chief Economist, Grant Thornton LLP

John W. Rogers Jr., chairman and co-CEO of Ariel Investments, sees the recovery continuing, with inflation “surprisingly on the high side.” Rogers said he’s “very, very optimistic” about GDP growth being substantially better than expectations. But he warned — a week before a period of market volatility— that stocks are “very, very expensive.” More from Rogers:

“Interest rates will be much, much higher. And that will cause (an outcome) similar to what happened back at the turn of the century, when the internet bubble burst, the S&P 500 and Nasdaq collapsed and value-oriented stocks did extremely well, relatively speaking.

The Russell 2500, or small, mid-cap value stocks —we wouldn’t be surprised to see them more than hold their own and recover with a plus 10%. … Everyone’s made such easy money in large-cap growth stocks. We think that’s where the damage is going to be.

Business travel is going to be substantially, permanently changed by what we’ve learned from COVID and Zoom. I’d be cautious around the airlines (stocks) and business hotels. The fun, leisure places they’ll still be there. There’s a lot of pent-up demand. People will want to go on cruise ships.”

—John W. Rogers Jr., Chairman and Co-CEO, Ariel Investments

Froehlich predicted that the Dow will end the year at 40,100, or 401k, a repeat prediction from last year. He said the technology-heavy Nasdaq will cross 17,000, “a little bit stronger than the Dow, but I think they’re both going to do extremely well.” He thinks inflation will moderate to about 4.5%.

“I’m very bullish on technology, especially with the labor shortage. …Who’s going to replace all these employees we can’t find? It’s going to be technology. Who’s going to replace all the meetings that we don’t go to anymore in person? It’s going to be technology. I think the world has changed so dramatically that we don’t want to accept (it). Boards are never going to operate the way they used to operate. Employees are never going to have to go back to work in the office five days a week.

We’ve never had more information at our fingertips about daily health. We can track our steps. We can track our heart rate, our blood sugar, our blood pressure and more vitals in real-time through the day. This unprecedented level of understanding about our daily activity levels is leading to a boom in the connected health industry.

Corporate concentration is hitting levels we haven’t seen in decades. … As many industries digitized themselves, the competitive dynamics are increasingly ‘winner take all.’ They just keep getting bigger. … Larger companies were able to have more financial flexibility as the pandemic hit, and then in 2021 as supply chains became constrained, larger companies were also better able to manage the inventory and cost pressures.”

—Dr. Bob Froehlich, Owner, Kane County Cougars Baseball Club; Former Vice Chairman, Deutsche Asset Management

The trio answered Savage’s question of where to invest $100,000 in the current market:

  • Swonk said she would guard against market gyrations in uncertain times by investing $50,000 in a fund designed specifically to hedge against volatility. The rest would go into climate change and clean energy investments, including electric vehicles beyond Tesla. “Demand for electric vehicles is skyrocketing.”
  • Rogers said he would invest $50,000 immediately and then put the rest in the market at a rate of $5,000 per month. He said financial services stocks remain inexpensive. He targeted Lazard, Northern Trust and BOK Financial (Bank of Oklahoma). He likes home-related stocks (Resideo, ADT, Mohawk) and sports-related companies as people return to entertainment venues. He also would target media companies because campaign spending increases during an election year.
  • Froehlich would put $25,000 in Meta (Facebook) to match his bullish tech outlook. He would put $25,000 in UnitedHealth Group to align with his 24/7 health checkup thoughts, and $25,000 in Amazon because the big get bigger. The final $25,000 would go into iRobot Corp. shares, reflecting changes in employment trends.

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