The market has been on a roll the past few months, but uncertainty will plague 2022, according to Bob Doll, chief investment officer of Crossmark Global Investments, a financial services firm based in Houston.

"The reopening of the economy combined with increasing consumer confidence and strong corporate earnings allowed the market to soar to new highs in 2021,” Doll said in a statement. "However, uncertainty still remains for the equity market with the unpredictability of public health, high inflation that has lasted longer than expected, and an imminent interest rate increase. Because of this, we believe it will be tougher to see the same kind of returns in 2022.”

Doll makes 10 predictions for the New Year at the beginning of each year. He will discuss his forecasts for 2022, which were released today, in depth during a press conference Thursday.

For more than 30 years, Doll has published the predictions previewing key themes and his outlook for the year ahead, including risks for equity markets, monetary policy, and the global economy. 

The coming year will center on a tug of war between the positive tailwinds from good earnings and the negative headwinds stemming from valuation pressure spurred by rising interest rates, Doll said.

Even amid the current good economic climate, Doll said, “We are likely to see interest rates move higher across the curve, slower earnings growth, and inflation that is still above average, but lower than what we've witnessed in 2021.”

Doll made the following predictions for 2022:

1. U.S. real growth and inflation will remain above-trend but decline from 2021 levels.
2. Inflation will fall, but core inflation will be stuck at around 3%.
3. For the first time since 1958 and 1959, 10-year Treasurys will provide a second consecutive year of negative returns.
4. Stocks will experience their first 10% correction since the pandemic and fail to make the gains widely expected.
5. Cyclical, value and small stocks will outperform defensive, growth and large stocks.
6. Financials and energywill  outperform utilities and communication services.
7. International stocks will outperform the U.S. for only the second year in the last decade.
8. Values-based investing will continuesto gain share.
9. After a 60-plus year low in 2021, federal interest expense as a percentage of revenue will begin a long-term move higher.
10. Republicans will gain at least 20 to 25 House seats and barely win the Senate.

In 2021, earnings growth exceeded predictions made at the beginning of the year by record amounts. At the same time, risk taking was heavily incentivized by extreme monetary and fiscal reflation, Doll said in a Crossmark report. The trend was amplified because consumers enjoyed record excess savings created by government transfer payments.

In part because of the rise in inflation, 2022 will be more challenging, he said. “While solid economic and earnings growth will be a tailwind for equities, rising interest rates and stubborn inflation will be headwinds. This is likely to create volatility and, at times, turbulent churning,” he said.