Tactical ETF 4Q21 Market Review & Outlook

January 18, 2022 — Robust growth and high inflation will support the more aggressive monetary policy path, which now includes a rapid tapering of QE purchases by the end of Q1, three to four hikes during the year, and strong indications of balance sheet reductions during 2022. We expect long rates to reprice modestly higher during the first half and yields to move more aggressively on the front end, flattening the curve and pushing 10yr yields closer to 2%. We also expect credit spreads to remain stable; however, we believe spreads are more vulnerable to balance sheet reductions, fears that the Fed may cause the economy to slow faster than expected, and overall elevated volatility during the first half.