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RETIREMENT PLAN INVESTOR

Use your plan ID (available on your account statement) to determine which employer-sponsored retirement plan website to use:

IF YOUR PLAN ID BEGINS WITH IRK, BRK, 1, 2 OR 754

Visit americanfunds.com/retire

IF YOUR PLAN ID BEGINS WITH 34 OR 135

Visit myretirement.americanfunds.com

2022 Outlook

Long-term perspective on markets and economies

2022 OUTLOOK

Expect strong but slowing economic growth in 2022

The global economy should enjoy solid growth in 2022, according to Capital Group economists. But clear risks lie ahead, including the gradual reduction of stimulus from central banks, stubborn inflation, a slowing China and the emergence of COVID variants.

Rob Lovelace on the year ahead

Capital Group's vice chair and president offers his outlook for 2022

U.S. OUTLOOK

U.S. economy is healthy, but inflation persists

The American economy should remain healthy in 2022 thanks to strong corporate profits and robust consumer spending, but inflation pressures and other headwinds will likely temper growth.

The image shows the average annual returns in USD for U.S. equity and fixed income at different inflation levels from 1970 to 2021. Returns for each level of inflation are as follows. For inflation below 0%: U.S. equity –6.5% and U.S. fixed income 6.8%. For 0%–2% inflation: U.S. equity 11.7% and U.S. fixed income 5.0%. For 2%–3% inflation: U.S. equity 14.2% and U.S. fixed income 4.2%. For 3%–4% inflation: U.S. equity 10.8% and U.S. fixed income 6.6%. For 4%–6% inflation: U.S. equity 8.8% and U.S. fixed income 4.3%. For 6% inflation or above: U.S. equity –4.1% and U.S. fixed income –4.3%.

Sources: Capital Group, Bloomberg Index Services Ltd., Morningstar, Standard & Poor’s. As of 11/30/21. All returns are inflation-adjusted real returns in USD. U.S. equity returns represented by the Standard & Poor’s 500 Composite Index. U.S. fixed income represented by Ibbotson Associates SBBI U.S. Intermediate-Term Government Bond Index from 1/1/70–12/31/75, and Bloomberg U.S. Aggregate Bond Index from 1/1/76–11/30/21. Inflation rates are defined by the rolling 12-month returns of the Ibbotson Associates SBBI U.S. Inflation Index.

Pricing power can help companies fight inflation

Stocks and bonds have generally fared well in most inflationary environments. One strategy to consider is investing in companies with pricing power to help minimize inflation’s impact on investment returns.

INTERNATIONAL OUTLOOK

The digital revolution goes global

The outlook for international equity markets is brighter than it’s been in a long time, thanks to improving European economic growth, the expansion of the digital revolution beyond U.S. shores and the restoration of dividends by companies throughout the world.

The graphic shows a world map of companies with rising dividends: Broadcom, UnitedHealth, J.P. Morgan and Comcast in the United States; Canadian Natural Resources, TC Energy and TD Bank in Canada; Enel and Zurich Insurance in Europe; Power Grid of India; Tokyo Electron in Japan; and China Gas Holdings, Samsung and Taiwan Semiconductor Manufacturing in Asia. Sources: Capital Group, Refinitiv Eikon. As of October 31, 2021.

Dividends stage a comeback of global proportions

A broad range of companies with a history of paying meaningful and growing dividends can be found in markets across the globe.

The graphic shows a world map of companies with rising dividends: Broadcom, UnitedHealth, J.P. Morgan and Comcast in the United States; Canadian Natural Resources, TC Energy and TD Bank in Canada; Enel and Zurich Insurance in Europe; Power Grid of India; Tokyo Electron in Japan; and China Gas Holdings, Samsung and Taiwan Semiconductor Manufacturing in Asia. Sources: Capital Group, Refinitiv Eikon. As of October 31, 2021.

Sources: Capital Group, Refinitiv Eikon. As of 10/31/21.

FIXED INCOME OUTLOOK

Maintain balance with bonds

With equity market volatility surfacing and many assets priced for perfection, fixed income has the potential to provide important diversification to investor portfolios.

In a challenging bond market, it’s all about selectivity

History shows that high-quality fixed income can often generate positive returns even as rates rise. That’s where selectivity comes in.

Get the 2022 Outlook report

Long-term perspective on markets and economies

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Rob Lovelace is an equity portfolio manager on Capital Group Canadian Focused Equity Fund (Canada).

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